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NEW YORK--(BUSINESS WIRE)--Dec 7, 2022--
IFF (NYSE: IFF) today announced the next phase of its strategic transformation by previewing its refreshed strategic plan and new operating model, developed through an extensive assessment with the Company’s senior leadership, customers, investors and key partners.
At its Investor Day on Dec. 7, 2022, IFF management will provide additional commentary on the following financial and strategic initiatives:
The transformed IFF will be a premier partner to its customers, delivering unmatched innovation, service and quality with an industry-leading product portfolio. The Company will be guided by a customer-centric approach with a commitment to growth, greater productivity and disciplined execution. IFF’s broad portfolio, diverse platform and leading capabilities provide compelling cross-selling opportunities to achieve greater sales growth, and incremental cost-reduction initiatives position the Company to deliver long-term profitable growth.
“IFF has built an incredible foundation as a trusted partner with world-class talent, a robust R&D pipeline and broad portfolio that delivers for our diverse customers around the world,” said IFF CEO and Director Frank Clyburn. “Now, having completed several transformative milestones, we are acting with urgency to capitalize on strengths and address opportunities through a more growth-centric strategy. Our refreshed strategic framework and new operating model will increase customer centricity and better align with end-market needs. This next phase is designed to ensure we are innovative, efficient and disciplined as we strengthen our competitive position and achieve long-term financial success. To do so effectively, we are enhancing our productivity to reduce our cost base, reinvesting in our highest-value businesses, embedding ESG+ in all we do, and enhancing our culture to maximize value creation for our customers, employees and shareholders.”
“These strategic actions represent an exciting opportunity to strengthen IFF’s focus on customers and better align with today’s marketplace, positioning IFF to accelerate its growth potential,” said Dale Morrison, chair of IFF’s Board of Directors. “Our Board is aligned with the vision Frank and the management team have developed through a comprehensive review. We are pleased to begin the process to evolve IFF’s Board, including ensuring we have the right composition of experience and skillsets, so we can best support and oversee the Company through its next phase of growth and value creation.”
Evolving IFF’s Board of Directors:
IFF Board of Directors plans to evolve its Board in line with best-in-class corporate governance standards, ensuring the Company has the optimal support and oversight to advance its growth and transformation strategy. The Board intends to reduce the size of its Board from its current size of 14 directors to a target size of approximately ten directors by the May 2023 Annual Shareholder Meeting.
The IFF Board also intends to evolve the composition of its Board by adding outside senior executives with specific management, strategy and operations expertise relevant to IFF’s current profile, and to progress toward best-in-class governance standards. IFF today announced the appointment of Mark Costa, Chairman and CEO of Eastman, to the Company’s Board of Directors, effective Jan. 1, 2023. Costa brings several decades of leadership experience in the specialty materials industry and oversaw a successful transformation and sustained growth at Eastman.
Morrison continued, “I am pleased to welcome Mark to the Board. His experience leading a global organization through a period of strategic transformation, growth-focused execution and sustainable innovation will benefit IFF’s customers, shareholders and teams around the world.”
Growth-Focused Strategy to Do What Matters Most:
IFF’s new strategic framework will position the Company to Do What Matters Most and drive sustained profitable growth, concentrating on customer excellence, incremental cost reductions, consistent execution and disciplined investments to advance the opportunities with greatest potential returns. The strategy deeply embeds ESG+ priorities across IFF’s entire enterprise, strengthening the Company’s commitment to positively impact its environmental footprint and communities in which it operates. With this refreshed strategic framework, IFF will be positioned to meet customer demand and fulfill its purpose of applying science and creativity for a better world.
IFF’s strategic framework will be guided by the following objectives and key pillars:
New Operating Model Aligned to End Markets and Customer Demand:
IFF previewed its vision for its new operating model to transform the Company into “One IFF”. The Company will transition its current divisional structure to align businesses to three core end markets: Food and Beverage, Home and Personal Care, and Health. This transition will transform IFF’s operating model into a more customer-centric and market-backed approach, consistent with IFF’s goal to become the premier partner for its customers for all solutions within their respective business areas. The new simplified operating structure will enhance execution and streamline customer delivery. IFF expects its new operating model to be fully in effect by the end of 2023.
IFF has also established a Center for Commercial Excellence, reporting to CEO Frank Clyburn. This group will focus on enhancing IFF’s sales capability, including global key account planning and accelerating incremental sales opportunities through a more holistic approach to customers by leveraging IFF’s full product portfolio. In addition, IFF will centralize global marketing, commercial analytics and leverage digital capabilities within the Commercial Excellence team.
Updates to Executive Leadership Team:
The Company will maintain its existing four division structure until its new operating model is fully in effect by the end of 2023. After 34+ years at IFF, Nicolas Mirzayantz, currently president of IFF’s Nourish division, will be leaving the Company effective Dec. 31, 2022. Upon Mirzayantz’s departure, IFF CEO Frank Clyburn will lead IFF’s Nourish division until a replacement is named. All other divisional leadership will continue in their current positions.
Ana Paula Mendonça, currently IFF president, Fragrance Ingredients, has been named senior vice president, Commercial Excellence, where she will lead the Company’s new Center for Commercial Excellence and oversee the sales excellence program, global marketing and commercial analytics, leveraging digital capabilities. With this appointment, Mendonça becomes a member of IFF’s Executive Committee and will be based in the Company’s New York City headquarters.
Michael DeVeau, currently IFF senior vice president and chief investor relations and chief communications officer, has been appointed senior vice president, corporate finance and investor relations and will lead the Company’s corporate and divisional financial planning and analysis team, as well as corporate strategy, M&A and investor relations. With this transition, Deborah Borg, executive vice president, chief human resources and diversity & inclusion officer, will assume leadership of IFF’s corporate communications.
With the recent additions of Ana Mendoca, Deborah Borg, and Ralf Finzel, executive vice president and global operations officer, who was announced in Oct. 2022, IFF continues to transform its Executive Committee, augmenting institutional knowledge with experienced, diverse and talented senior leaders from adjacent industries.
Financial Outlook:
The Company has announced preliminary financial guidance for 2023, where it expects to achieve mid-single digit adjusted operating EBITDA growth, on a comparable currency-neutral basis, as it continues to take necessary pricing action to offset inflation, drives productivity and delivers cost reductions. At the same time, the Company will make commercial, R&D and capacity investments critical for long-term success.
IFF today outlined long-term financial objectives, where the Company believes that it can deliver industry-leading sales and adjusted operating EBITDA growth. The Company expects – on average – to grow sales by 4% to 6% and adjusted operating EBITDA by 8% to 10%, on a comparable currency neutral basis over the 2024, 2025 and 2026 period. In addition, the Company expects to reach <3x Net Debt / Credit Adjusted EBITDA in 2024 through operational improvements and non-core divestitures, at which time the Company intends to reactivate its share repurchase program. The Company also maintains its commitment to return cash to shareholders through its competitive and growing dividend.
IFF has accelerated and expanded enterprise-wide productivity initiatives to drive additional cost reductions in administrative expenses implementing a restructuring program to improve efficiency across the organization. The Company is targeting approximately $100 million in annualized savings through headcount reduction. With these additional savings, the Company now expects to realize net annualized savings of $350 to $400 million during the 2023-2025 period.
Portfolio Optimization:
IFF reconfirmed its plan to continue to optimize its portfolio through non-core divestitures, subject to tax and other requirements stemming from its N&B merger, to improve the Company’s capital structure and allow for greater investment in high-return businesses. The Company expects to announce three non-core divestitures by the end of the first quarter of 2023, with expected proceeds of approximately $1.2 billion to be used for debt reduction.
IFF is continuing to assess its portfolio to identify additional portfolio optimization and divestiture opportunities.
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
Statements in this press release, which are not historical facts or information, are “forward looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward looking statements are based on management’s current assumptions, estimates and expectations including those concerning the impacts of COVID 19 and our plans to respond to its implications; the expected impact of global supply chain challenges; our ability to manage supply chain including improving our service levels and increasing capacity and investment; expectations regarding future sales and profit, including the impact of strategic initiatives, foreign exchange, pricing actions, raw materials, energy and sourcing logistics and manufacturing costs; expectations of the impact of inflationary pressures and the pricing actions to offset exposure to such impacts; the impact of high input costs, including commodities, raw materials, transportation and energy; our ability to drive cost discipline measures and the ability to recover margin to pre-inflation levels; the progress of our portfolio optimization strategy and increase of our productivity, through non-core business divestitures and acquisitions; our combination with N&B, including the expected benefits and synergies of the N&B transaction and future opportunities for the combined company; the success of our integration efforts and ability to deliver on our synergy commitments as well as future opportunities for the combined company; the impact of global economic uncertainty on demand for consumer products; the growth potential of the markets in which we operate, including the emerging markets; expected capital expenditures; the expected costs and benefits of our ongoing optimization of our manufacturing operations and portfolio, including the expected number of closings, expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements; our ability to invest in research and development and digitalization strategies; our ability to innovate and execute on specific consumer trends and demands; our ability to execute on our environmental, sustainability and governance goals; our ability to strengthen our talent and culture; our ability to enhance our innovation efforts and drive cost efficiencies; and our ability to continue to generate value for, and return cash to, our shareholders.
These forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Certain of such forward looking information may be identified by such terms as “target”, “aspire”, “expect”, “anticipate”, “believe”, “intend”, “outlook”, “may”, “estimate”, “should”, “predict” and similar terms or variations thereof. Such forward looking statements are based on a series of expectations, assumptions, estimates and projections about the Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all forward periods. Our actual results may differ materially from any future results expressed or implied by such forward looking statements.
Such risks, uncertainties and other factors include, among others, the following: (1) inflationary trends in the price of our input costs, such as raw materials, transportation and energy; (2) supply chain disruptions, geopolitical developments, including the Russia Ukraine conflict, or climate change related events (including severe weather events) that may affect our suppliers or procurement of raw materials; (3) disruption in the development, manufacture, distribution or sale of our products from COVID 19 and other public health crises; (4) our ability to achieve the cost savings expected in the time expected or at all; (5) risks related to the integration of the N&B business, including whether we will realize the benefits anticipated from the merger in the expected time frame; (6) our ability to successfully establish and manage acquisitions, collaborations, joint ventures or partnerships, or the failure to close strategic transactions or divestments; (7) our ability to successfully market to our expanded and diverse customer base; (8) our substantial amount of indebtedness and its impact on our liquidity and ability to return capital to its shareholders; (9) our ability to effectively compete in our market and develop and introduce new products that meet customers’ needs; (10) our ability to retain key employees; (11) changes in demand from large multinational customers due to increased competition and our ability to maintain “core list” status with customers; (12) our ability to successfully develop innovative and cost effective products that allow customers to achieve their own profitability expectations; (13) disruption in the development, manufacture, distribution or sale of our products from natural disasters, public health crises, international conflicts, terrorist acts, labor strikes, political crisis, accidents and similar events; (14) the impact of a significant data breach or other disruption in our information technology systems, and our ability to comply with data protection laws in the U.S. and abroad; (15) volatility and increases in the price of raw materials, energy and transportation; (16) our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry standards, including regarding product safety, quality, efficacy and environmental impact; (17) our ability to meet increasing customer, consumer, shareholder and regulatory focus on sustainability; (18) defect, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and capabilities; (19) our ability to react in a timely and cost effective manner to changes in consumer preferences and demands, including increased awareness of health and wellness; (20) our ability to benefit from our investments and expansion in emerging markets; (21) the impact of currency fluctuations or devaluations in the principal foreign markets in which we operate; (22) economic, regulatory and political risks associated with our international operations; (23) the impact of global economic uncertainty on demand for consumer products; (24) our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws; (25) our ability to successfully manage our working capital and inventory balances; (26) the impact of the failure to comply with U.S. or foreign anti-corruption and anti-bribery laws and regulations, including the U.S. Foreign Corrupt Practices Act; (27) any impairment on our tangible or intangible long lived assets, including goodwill associated with the N&B merger and the acquisition of Frutarom; (28) our ability to protect our intellectual property rights; (29) the impact of the outcome of legal claims, regulatory investigations and litigation; (30) changes in market conditions or governmental regulations relating to our pension and postretirement obligations; (31) the impact of changes in federal, state, local and international tax legislation or policies, including the Tax Cuts and Jobs Act, with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes; (32) the impact of the United Kingdom’s departure from the European Union; (33) the impact of the phase out of the London Interbank Offered Rate (LIBOR) on interest expense; and (34) risks associated with our CEO transition, including the impact of employee hiring and retention.
The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by the Company. Please refer to Part I . Item 1A., Risk Factors, of the Company’s Annual Report on Form 10 K filed with the SEC on February 28, 2022 for additional information regarding factors that could affect our results of operations, financial condition, and liquidity.
We intend our forward-looking statements to speak only as of the time of such statements and do not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions, or results. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this press release or included in our other periodic reports filed with the SEC could materially and adversely impact our operations and our future financial results. Any public statements or disclosures made by us following this press release that modify or impact any of the forward-looking statements contained in or accompanying this press release will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this press release.
Use of Non-GAAP Financial Measures
We provide in this press release non-GAAP financial measures, including: (i) comparable currency neutral sales; (ii) adjusted operating EBITDA and comparable currency neutral adjusted operating EBITDA; and (iii) net debt to EBITDA. Our non-GAAP financial measures are defined below.
Currency Neutral metrics eliminate the effects that result from translating non-U.S. currencies to U.S. dollars. We calculate currency neutral numbers by translating current year invoiced sale amounts at the exchange rates used for the corresponding prior year period. We use currency neutral results in our analysis of subsidiary or segment performance. We also use currency neutral numbers when analyzing our performance against our competitors.
Adjusted operating EBITDA excludes depreciation and amortization expense, interest expense, other income, net, restructuring and other charges and certain non-recurring items such as acquisition related costs, gains on sale of assets, impairment of goodwill, impairment of long lived assets, shareholder activism related costs, business divestiture costs, employee separation costs, Global Shared Services implementation costs, Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs and integration related costs.
Net debt to credit adjusted EBITDA is the leverage ratio defined as net debt (which is debt for borrowed money less cash and cash equivalents) divided by the trailing 12-month EBITDA.
These non-GAAP measures are intended to provide additional information regarding our underlying operating results and to allow for comparable year over year performance. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a press release in accordance with GAAP. In discussing our historical and expected future results and financial condition, we believe it is meaningful for investors to be made aware of and to be assisted in a better understanding of, on a period-to-period comparable basis, financial amounts both including and excluding these identified items, as well as the impact of exchange rate fluctuations. These non-GAAP measures should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.
The Company cannot reconcile its expected Comparable Currency Neutral Sales Adjusted Operating EBITDA, Comparable Currency Neutral Adjusted Operating EBITDA and Net Debt To Credit Adjusted EBITDA under “Financial Outlook” without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company's control and/or cannot be reasonably predicted at this time. These items include but are not limited to gains (losses) on sale of assets, shareholder activism related costs, business divestiture costs, employee separation costs, N&B inventory step-up costs, N&B transaction related costs, integration related costs and the impact of the merger with N&B.
Welcome to IFF
At IFF (NYSE: IFF), an industry leader in food, beverage, scent, health and biosciences, science and creativity meet to create essential solutions for a better world – from global icons to unexpected innovations and experiences. With the beauty of art and the precision of science, we are an international collective of thinkers who partners with customers to bring scents, tastes, experiences, ingredients and solutions for products the world craves. Together, we will do more good for people and planet. Learn more at iff.com, Twitter , Facebook, Instagram, and LinkedIn.
© 2022 by International Flavors & Fragrances Inc. IFF is a Registered Trademark. All Rights Reserved.
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CONTACT: Media Relations:
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332.877.5339
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KEYWORD: UNITED STATES NORTH AMERICA NEW YORK
INDUSTRY KEYWORD: TECHNOLOGY CHEMICALS/PLASTICS SPECIALTY PROFESSIONAL SERVICES MANUFACTURING FOOD/BEVERAGE COSMETICS ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) RETAIL FOOD TECH
SOURCE: IFF
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PUB: 12/07/2022 06:54 AM/DISC: 12/07/2022 06:54 AM
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