International Flavors & Fragrances...
Transcript of International Flavors & Fragrances...
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International Flavors & Fragrances Inc.
Morgan Stanley Consumer Retail ConferenceNovember 18, 2008
International Flavors & Fragrances Inc.
Morgan Stanley Consumer Retail ConferenceNovember 18, 2008
Robert M. AmenChairman and CEO
Robert M. AmenChairman and CEO
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NoticesNotices
Forward Looking Statement:Certain statements made in this presentation that are not historical facts may constitute “forward looking” statements under the Private Securities Litigation Reform Act of 1995, including those that are signified by words such as “anticipate,” “believe,” “expect,” “estimate,” “target,” and similar expressions. These forward-looking statements reflect the current views of IFF and its management and are subject to risks, uncertainties, and changes in circumstances. Actual results may differ materially. Risks and uncertainties include general economic and business conditions; interest rates; the price, quality and availability of raw materials; our ability to achieve our business strategy and anticipated cost savings, profitability and growth targets; the impact of currency fluctuation or devaluation; uncertainties related to litigation; the impact of possible pension funding obligations and increased pension expense; the effect of legal and regulatory proceedings and restrictions; and other factors described in our Form 10-K for the year ended December 31, 2007 and our Form 10-Q for the quarter ended September 30, 2008. IFF does not undertake to update any forward-looking statements.
Any public statements or disclosures by IFF following this presentation that modify or impact any of the outlook or other forward-looking statements contained in or accompanying this presentation or as part of the webcast will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this release or the webcast.
Non-GAAP Financial Measures:The Company uses certain non-GAAP financial measures to supplement our GAAP financial results. These financial measures should not be considered in isolation or as superior to our GAAP financial measures. Additional information concerning our non-GAAP financial measures and a reconciliation to GAAP is available on our website at www.iff.com, on the “Investor Relations” page.
Forward Looking Statement:Certain statements made in this presentation that are not historical facts may constitute “forward looking” statements under the Private Securities Litigation Reform Act of 1995, including those that are signified by words such as “anticipate,” “believe,” “expect,” “estimate,” “target,” and similar expressions. These forward-looking statements reflect the current views of IFF and its management and are subject to risks, uncertainties, and changes in circumstances. Actual results may differ materially. Risks and uncertainties include general economic and business conditions; interest rates; the price, quality and availability of raw materials; our ability to achieve our business strategy and anticipated cost savings, profitability and growth targets; the impact of currency fluctuation or devaluation; uncertainties related to litigation; the impact of possible pension funding obligations and increased pension expense; the effect of legal and regulatory proceedings and restrictions; and other factors described in our Form 10-K for the year ended December 31, 2007 and our Form 10-Q for the quarter ended September 30, 2008. IFF does not undertake to update any forward-looking statements.
Any public statements or disclosures by IFF following this presentation that modify or impact any of the outlook or other forward-looking statements contained in or accompanying this presentation or as part of the webcast will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this release or the webcast.
Non-GAAP Financial Measures:The Company uses certain non-GAAP financial measures to supplement our GAAP financial results. These financial measures should not be considered in isolation or as superior to our GAAP financial measures. Additional information concerning our non-GAAP financial measures and a reconciliation to GAAP is available on our website at www.iff.com, on the “Investor Relations” page.
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AgendaAgenda
vFlavor and Fragrance Industryv IFF OverviewvFinancial Highlights vBuilding a Stronger IFFvLooking AheadvSummary
vFlavor and Fragrance Industryv IFF OverviewvFinancial Highlights vBuilding a Stronger IFFvLooking AheadvSummary
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Savory & Beverage FlavorsSavory & Beverage Flavors
Pictures are representative of products in the market. Not all products flavored by IFF.
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Sweet/Pharma/Oral and Dairy Flavors Sweet/Pharma/Oral and Dairy Flavors
Pictures are representative of products in the market. Not all products flavored by IFF.
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Fine Fragrances & Beauty CareFine Fragrances & Beauty Care
Pictures are representative of products in the market. Not all products fragranced by IFF.
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Functional FragrancesFunctional Fragrances
Pictures are representative of products in the market. Not all products are fragranced by IFF.
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F&F IndustryF&F Industry
v Flavor and Fragrance industry is ~$14 billion– 4 largest companies comprise ~ 70% of market
v Flavor and Fragrance is key component to building consumer preference and brand differentiation
v Demand driven by growth of:– Consumer products
– GDP and disposable income§ Developed market growth on par with GDP
§ Developing markets will contribute 50+% of global growth
v Flavor and Fragrance industry is ~$14 billion– 4 largest companies comprise ~ 70% of market
v Flavor and Fragrance is key component to building consumer preference and brand differentiation
v Demand driven by growth of:– Consumer products
– GDP and disposable income§ Developed market growth on par with GDP
§ Developing markets will contribute 50+% of global growth
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Structural Drivers of Industry GrowthStructural Drivers of Industry Growth
v Population– 5 billion people live in developing markets
– Differing value propositions
v Growing middle class in developing markets– Increasing disposable income
v Global consumer mega trends – Health and wellness, urbanization, and convenience
– Increasing demand for uniqueness & innovation
v Population– 5 billion people live in developing markets
– Differing value propositions
v Growing middle class in developing markets– Increasing disposable income
v Global consumer mega trends – Health and wellness, urbanization, and convenience
– Increasing demand for uniqueness & innovation
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Shampoo & ConditionerConsumption TrendsShampoo & ConditionerConsumption Trends
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0 5 10 15 20 25 30
Per Capita Disposable Income ($)
Per C
apita
Usa
ge ($
)
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IFF ProfileIFF Profile
v Founded in 1889v A recognized leader in the F&F industryv Global presencev Long-standing relationships with leading consumer
products companiesv Core competencies in:
– Material research– Consumer insight– Product creativity
v Financially strong
v Founded in 1889v A recognized leader in the F&F industryv Global presencev Long-standing relationships with leading consumer
products companiesv Core competencies in:
– Material research– Consumer insight– Product creativity
v Financially strong
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Diversified Global PortfolioDiversified Global Portfolio
Sales by Region
North America
24%
Greater Asia23%
EAME39%
Latin America
14%
Sales by Category
Functional Fragrances
23%
Ingredients12%
Flavors46%
Fine Fragrance & Beauty Care
19%
9 Months 2008 Sales
$1.85 Billion
76% of revenue generated outside the U.S. 76% of revenue generated outside the U.S.
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Competitive StrengthsCompetitive Strengths
v Research & Development– ~8.5% of sales– Basic and applied research– 188 patents granted over the past decade – 18 YTD
v Creative Expertise– 14 creative centers– 95 perfumers, 80 flavorists
v Consumer Understanding– Annually, more than 400,000 interviews worldwide
v Regulatory Expertise
v Research & Development– ~8.5% of sales– Basic and applied research– 188 patents granted over the past decade – 18 YTD
v Creative Expertise– 14 creative centers– 95 perfumers, 80 flavorists
v Consumer Understanding– Annually, more than 400,000 interviews worldwide
v Regulatory Expertise
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Collaborative Approach
Emotional Positioning
Uniqueness
Materials Advantage
Consumer InsightsTechnology
IFF’s Value Creation Model
ConsumerConsumer--Preferred Preferred ProductsProducts
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Organic Sales Growth: Q1 2006 – Q3 2008(In local currency)Organic Sales Growth: Q1 2006 – Q3 2008(In local currency)
7%
2%
4%
1%2%
5%4%
3%
6%7%
5%
0%
3%
6%
9%
12%
Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
Average Quarterly Growth Rate 4.1%
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Earnings Per Share(Excludes items impacting comparability*)Earnings Per Share(Excludes items impacting comparability*)
$0.45
$0.75 $0.81
$0.70
$0.53
$0.71$0.67
$0.59
$0.69
$0.62
$0.72
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08
*Includes items such as one-time tax gains, assets sales, restructuring charges and implementation costs
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$270 $ 2 9 6
$177
$2 8 2
$13 6
$12 2
$0
$100
$200
$300
$400
2003 2004 2005 2006 2007 9 mos 08
$19 2
Substantial Cash Generation(Dollars in millions)Substantial Cash Generation(Dollars in millions)
v Consistent free cash flow in excess of needsv Selective reinvestmentv Dividend payout 30%-35%
v Consistent free cash flow in excess of needsv Selective reinvestmentv Dividend payout 30%-35%
Operating Cash Flow
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Solid Financial ReturnsSolid Financial Returns
26.0%24.0%
21.0%
25.0%
33.0%
28.0%
12.7% 13.7% 13.0% 14.0% 15.0%13.7%
0%
5%
10%
15%
20%
25%
30%
35%
2003 2004 2005 2006 2007 9 months 2008
ROE ROI
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Building a Stronger IFFBuilding a Stronger IFF
vGrow– Organic– Geographic– New applications and technologies
v Improve Profitability– Input cost recovery – Discretionary spending– Productivity and efficiency
vMaintain Financial Strength– Capital effectiveness
vGrow– Organic– Geographic– New applications and technologies
v Improve Profitability– Input cost recovery – Discretionary spending– Productivity and efficiency
vMaintain Financial Strength– Capital effectiveness
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Looking AheadLooking Ahead
vFlat or slightly positive y-o-y local currency sales growth in Q4
vCurrent financial crisis will have uneven impact on the world economies
vBusiness plans anticipate a generally weaker consumer environment in developed markets
vFlat or slightly positive y-o-y local currency sales growth in Q4
vCurrent financial crisis will have uneven impact on the world economies
vBusiness plans anticipate a generally weaker consumer environment in developed markets
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SummarySummary
vGood YTD performance in difficult environment
v Improving profitability remains a key priority
v Balance current performance with long-term goals
vConfident in strategy & business fundamentals
vGood YTD performance in difficult environment
v Improving profitability remains a key priority
v Balance current performance with long-term goals
vConfident in strategy & business fundamentals
Robert M. AmenChairman and CEO
Robert M. AmenChairman and CEO
Question and Answer Question and Answer SessionSession