IFF First Quarter 2026 Earnings Call - Solid Q1 execution, reaffirming full-year guidance despite Middle East-driven Q2 pressures

Edlain Rodriguez, Analyst, Mizuho Securities6: At this time, I would like to welcome everyone to the IFF First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. To ask a question at that time, please press 1 on your telephone keypad. If you would like to remove your name from the queue, please press 2. Participants will be announced by their name and company. In order to give all participants an opportunity to ask their questions, we request a limit of 1 question per person. I would now like to introduce Michael Bender, Head of Investor Relations. You may begin.

Edlain Rodriguez, Analyst, Mizuho Securities2: Thank you. Good morning, good afternoon, and good evening, everyone. Welcome to IFF’s First Quarter 2026 Earnings Conference Call. Yesterday afternoon, we issued a press release announcing our financial results. A copy of the release can be found on our ir website at ir.iff.com. Please note that this call is being recorded live and will be available for replay. During the call, we’ll be making forward-looking statements about the company’s performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially, please refer to our cautionary statement and risk factors contained in our Form 10-K and press release, both of which can be found on our website. Today’s presentation will include non-GAAP financial measures which exclude these items that we believe affect comparability.

A reconciliation of these non-GAAP financial measures to their respective GAAP measures is set forth in the press release. Please note that all the sales and EBITDA growth numbers that we will be speaking to on the call are all on a comparable currency-neutral basis unless otherwise noted. With me on the call today is our CEO, Erik Fyrwald, and our CFO, Michael DeVeau. We will begin with prepared remarks and then take questions at the end. With that, I would now like to turn the call over to Eric.

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, Mike. Hello, everyone. Thank you all for joining us today. IFF’s first quarter 2026 results reflect our continued focus on execution while serving customers with leading innovations and driving productivity and cash flow. Even amid uncertain market conditions around the world, we’re making solid progress on our commitments as we continue to strengthen IFF for long-term success. I’ll start today’s call by briefly summarizing the first quarter, and then I’ll talk about the key strategic progress we have made so far this year. I’ll then turn the call over to Mike, who will provide more details on the first quarter results, segment performance, and our outlook for 2026. Turning to slide 6, our team delivered a solid start to the year in the first quarter. Across all our businesses, we delivered solid sales growth driven by volume improvements.

Our Health & Biosciences segment led with mid-single-digit sales growth, while Taste, Food Ingredients, and Scent all grew low single digits. This growth, combined with our productivity initiatives, resulted in a higher margin. In the first quarter, we also generated a strong free cash flow improvement compared to last year. This reflects a focus on cash, including working capital. Over the past few years, we have made significant progress simplifying our portfolio. This strategic effort is resulting in our being able to focus and reinvest in our core and highest growth businesses while achieving our deleveraging targets. In March, we completed the divestiture of our commodity soy crush, concentrates, and lecithin business to Bunge for $110 million. Looking ahead, the sale process for our Food Ingredients business continues to make very good progress.

While we do not have any additional information to share today, we’re pleased by the strong interest in this business, and we will let you know as soon as there is news to share. In the first quarter, we also announced regional production and added innovation capabilities to better support the continued strong growth of our Health & Biosciences business in Latin America. This includes the startup of our Arroyito site in Argentina, our first full fermentation-based enzyme production in the region, and we opened a household care application laboratory at IFF’s innovation center in Brazil. Together, these will improve our speed, reliability, and locally relevant solution for markets, including brewing, Animal Nutrition, biofuels, and home care. With respect to the macroeconomic environment, including the ongoing Middle East conflict, it is clear that uncertainty and challenges will continue to persist through 2026.

We remain focused on advancing our commercial and innovation pipelines, driving productivity, and working with customers to offset inflation. This, when combined with our solid start to the year, de-risks the balance of the year and gives us the confidence to reaffirm our full year 2026 financial guidance ranges despite this uncertain environment. IFF’s diversified portfolio, the essential nature of our business, strong value proposition, and disciplined execution position us well to navigate ongoing volatility. In sum, we are doing what we said we would do with discipline and clarity. IFF is laser-focused on achieving the strategic goals we clearly laid out two years ago.

Our leadership team and our highly dedicated IFFers all around the globe are committed to delivering high-value products that anticipate and solve the evolving needs of our customers. While there’s more to do, I’m proud of our progress and how our global team keeps strengthening how we serve customers to enable us to deliver on our commitments. With that, I’ll pass the call over to Mike to offer a closer look at this quarter’s consolidated results. Mike?

Edlain Rodriguez, Analyst, Mizuho Securities3: Thank you, Erik, and thanks, everyone, for joining today. IFF delivered revenue of greater than $2.7 billion in the first quarter, with volume growth across all businesses. This solid performance led to 3% sales growth for the quarter, driven by mid-single-digit growth from Health & Biosciences and low single-digit increases from Taste, Food Ingredients, and Scent. Adjusted operating EBITDA totaled $568 million for the quarter, an 8% increase driven primarily by volume growth and productivity gains. Our adjusted EBITDA margin also increased by 110 basis points on a currency-neutral basis to 20.7%, which is our highest EBITDA margin since the second quarter of 2022. We continue to focus on what we can control, and the strategic progress we’ve made across all of our segments is clearly visible in these results.

On slide eight, I will provide a closer look at our performance by business segment. In Taste, sales increased 2% to $656 million, growing in all regions with a notable mid-single-digit performance in Greater Asia. The segment also recorded very strong quarter of profitability improvements with adjusted operating EBITDA of $153 million, an 18% increase from the year ago period. Profitability gains were primarily driven by volume growth, favorable net pricing, and productivity gains. Food Ingredients sales were up 3% to $839 million, as growth in nearly all businesses was led by strong double-digit increases in Inclusions and mid-single-digit growth in Systems. Volume growth in the quarter was approximately 5%, the highest it has been in several years.

Food Ingredients had a strong quarter profitability-wise as well, delivering an adjusted operating EBITDA of $114 million, a 12% increase year-over-year led by volume growth and productivity gains. Our Health & Biosciences segment achieved sales of $595 million, an increase of 5% from the prior year, which was all volume driven, with growth across nearly all businesses, especially in Animal Nutrition and Food Biosciences. From a profitability standpoint, Health & Biosciences delivered adjusted operating EBITDA of $153 million in the first quarter, an increase of 7% from the prior year, driven primarily by volume growth. Lastly, our Scent segment delivered sales of $651 million, representing a 1% growth from the prior year. First quarter performance was led by growth in Fine Fragrance, which had a strong double-digit year ago comparable and Consumer Fragrance.

Fragrance Ingredients was down in the quarter, as expected, due to continued market softness and price competition in the commodity portion of our portfolio. Adjusted operating EBITDA for the segment decreased 2% to $148 million, as benefits from volume growth and productivity gains were more than offset by unfavorable price to input costs, specifically in the commodity portion of our Fragrance Ingredients business. Turning to slide 9, cash flow from operations totaled $257 million, which is an increase of $130 million year-over-year. CapEx was $165 million year-to-date, or roughly 6% of sales. Our free cash flow position in the first quarter was $92 million, increasing $144 million year-over-year.

As mentioned last quarter, we remain disciplined in our execution across all elements of working capital, as it is a key priority in 2026 and as we remain focused on driving a meaningful improvement in cash flow this year. During Q1, we also returned $102 million to shareholders through dividends and an additional $35 million through our dilution plus share repurchase program. Our cash and cash equivalents finished at $562 million at the end of the first quarter. As of March 31, our gross debt totaled $5.85 billion, a significant decrease of more than $3 billion compared to the prior year period. Our trailing twelve-month credit adjusted EBITDA totaled approximately $2.1 billion. Our net debt to credit adjusted EBITDA ended Q1 at 2.5 times, slightly below last quarter.

Disciplined capital allocation remains a core focus for us as we maintain our balance sheet strength through operational execution. Turning to slide 10, I would like to walk you through our full year outlook for 2026. We are off to a solid start with first quarter results that outperformed our expectations going into the year. This strong performance de-risks the balance of the year and gives us confidence to reaffirm our full year 2026 financial guidance ranges. We are operating in an unpredictable environment, particularly as it relates to the ongoing conflict in the Middle East. While we cannot control the macro backdrop, the factors that we can control, including the strength of our commercial pipeline, the depth of our customer partnerships, and our continued productivity gains, gives us confidence in our ability to execute through this period.

For full year 2026, we are reiterating our sales expectation of $10.5 billion to $10.8 billion, representing 1%-4% growth. We expect to deliver top line growth in all our divisions, supported by new wins and robust innovation pipeline. From a profitability perspective, we continue to expect full year adjusted operating EBITDA of $2.05 billion to $2.15 billion, representing 3%-8% growth with solid margin expansion. We continue to expect foreign exchange to have a roughly one percentage point positive impact on full year sales growth with a minimal impact on adjusted operating EBITDA growth. Our full year guidance now reflects only two months of the soy crush, concentrate and lecithin business as the divestiture closed about a month ahead of schedule on March second versus the April first date embedded in original guidance.

As a result of the ongoing Middle East conflict, inflationary pressures are expected to build over the course of 2026. We are proactively working with our customers to offset these pressures through pricing actions, starting with surcharges related to logistics to energy costs, and then building to account for raw material inflation. In terms of phasings, we expect these inflationary trends to adversely impact profitability in the second quarter of 2026, where costs will begin to increase and our pricing actions are not fully implemented. Post Q2, we expect this pressure to gradually ease through the back half of the year as pricing actions take full effect. In addition, our most significant exposure to the Middle East conflict, both from a sales and margin perspective, sits within our Scent business and our Fine Fragrance business in particular.

We anticipate that Fine Fragrance volume in the Middle East will be impacted in the second quarter, part due to slower market demands, but also temporary supply chain challenges our customers are facing, such as getting packaging into the region. When combining these impacts, we expect absolute EBITDA dollars in the second quarter to be lower than the $568 million we reported in the first quarter, partially driven by lower volume, unfavorable price to input cost, and weaker mix related to Fine Fragrance softness. Our full year outlook we are reaffirming today reflects a different shape than what we expected 90 days ago, with a stronger Q1 and a more measured balance of year given the Middle East conflict. Our full year goal is unchanged. Behind that consistency is the strategic progress we continue to make at IFF.

We are applying stronger discipline to direct capital allocation towards higher value initiatives, strengthening our innovation and R&D pipeline, investing commercially where we have great opportunities, and driving structural productivity that will compound profitability leverage moving forward. We are pleased with what we’re building in terms of a more focused, more competitive IFF, and that gives us confidence in the value we’re creating as we move forward. With that, I would now like to turn the call back to Erik for closing remarks.

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, Mike. To close, I want to reiterate that the core businesses at IFF are strong and performing well. Our Q1 2026 results reflect the continued progress we are making in delivering on our commitments. Even in uncertain and evolving macroeconomic environment, we’ve stayed focused on what we can control and doing what we told you 2 years ago we would do. Getting to a focused portfolio of 3 strong businesses that are performing well with significantly more potential to create value for many years to come. I continue to spend a lot of time traveling the world to visit our teams and customers, and I’m ever more energized and confident about our future based on what I see and hear, including how our commercial and innovation pipelines continue to grow and advance.

I’m pleased that our focus allows us to reaffirm our full year 2026 guidance. We are investing for the future in innovation, commercial, and supply chain capabilities, and in customer partnerships that matter most. I am confident that we have the right strategy, the right team, and the right innovation to continue to create long-term value. Thank you. We’ll now open the line for your questions.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. We will now begin the Q&A session. If you’d like to ask a question, please press star followed by 1 on your telephone keypad. If you would like to remove your question, press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. As a reminder, we kindly ask that you limit your questions to 1 question per person. Our first question comes from the line of Ghansham Panjabi with Baird. Ghansham, your line is now open.

Ghansham Panjabi, Analyst, Baird: Yeah. Thank you, operator. Good morning, everybody. I guess, you know, on the outperformance that you delivered during the first quarter, can you just give us more color on the specifics that drove the upside? Also sort of looking back at the quarter, do you think you benefited from any, you know, sort of out of pattern ordering due to customer pre-buying, et cetera? Thank you.

Erik Fyrwald, Chief Executive Officer, IFF: Yes. Good morning, Ghansham. Thanks for the question. The strong top line and operating leverage during the first quarter was driven by, first of all, volume-led growth across all our segments, which was great to see, and continued solid productivity. We continue to strengthen our productivity muscle. Although we don’t know all the reasons for specific orders from all of our customers, we have not seen any indication of significant pre-buy.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Lisa De Neve with Morgan Stanley. Lisa, your line is now open.

Edlain Rodriguez, Analyst, Mizuho Securities0: Hi, thank you for my question. You talked a little bit on the call on the Food Ingredients exits, which is very helpful. I mean, I just wanted to understand, I mean, can you share some where you are in the process right now, and maybe when you intend or hope to update the market on any potential events? Thank you.

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, Lisa. We are running a very disciplined process, and it’s going very well, with several potential buyers going through second round of due diligence, and the feedback has been very positive so far. The business, as you know, is performing well. It had double-digit EBITDA growth in 2025 and again in the 1st quarter of this year. That gives us a lot of confidence that we will get through this process in a very positive way. As I said before, we expect to have an update by our 2nd quarter earnings call.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Nicola Tang with BNP Paribas. Nicola, your line is now open.

Edlain Rodriguez, Analyst, Mizuho Securities5: Thanks. Hi, everyone. I wanted to ask what assumptions on both pricing and input inflation you’re baking into your top line and EBITDA outlook. I’d love to understand kind of magnitude, and how much of the inflation do you expect to offset this year. Thank you.

Edlain Rodriguez, Analyst, Mizuho Securities3: Hi, Nicola. Thank you for the question. You’re right. We are seeing inflation across various inputs. Just to dimensionalize, Brent crude is a good indicator as it’s up significantly versus the average of 2025, and that impacts a couple elements of our cost baskets. At first, it starts with energy and logistics inflation, where we’re starting to already see double-digit increases coming through. Over time, it will make its way to some of the raw material costs, which we haven’t seen a big change yet, but we expect it to come later this year. Please remember, we do have inventory on our balance sheet. We have some protection in the short term as it relates to raw materials. Really our focus now, energy and logistics, given it’s more real-time. We’re working with our customer to implement pricing surcharges.

This is underway and will build throughout the quarter. As you know, our pricing in our industry is a strong part of our algorithm in the sense that it’s the part of way we do business. Consistent with historical inflationary cycles, we collaborate with our customers to fully offset any inflation, and usually it’s a 12 to 18-month period. I do not expect anything materially different this time around as we continue to engage and work with the customers there.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Fulvio Cazzol with Berenberg. Fulvio, your line is now open.

Fulvio Cazzol, Analyst, Berenberg: Yes, sir. Good morning, gents. Thanks for taking my question. Back in February, you anticipated a slow start to 2026 and for organic sales growth to sequentially accelerate through the year, supported by the strong innovation pipeline, the improvement in commercial execution. Now, I understood the comments that you made regarding the Scent business in the second quarter. For the rest of the segments, is that still your expectation?

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, Fulvio. The first quarter came in better than expectations with really good execution across all of our businesses. However, we did not anticipate the Middle East challenges, but as you can see, we have developed the ability to deal well with unexpected global challenges over the recent years. Having said that, our second quarter is challenged due to factors that Mike explained, but we do expect the commercial pipelines to continue to deliver in the second half, and that’s why we are confident in our full year guidance.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Kristen Owen with Oppenheimer. Kristen, your line is now open.

Kristen Owen, Analyst, Oppenheimer: Hi. Good morning. Thank you for the question. Just hoping you can discuss some of the scenarios around the remainder of the year. You’ve given some good color on Q2, given the strength of the Q1 results, what needs to happen to get you to the high end and the low end of the guide? Thank you.

Edlain Rodriguez, Analyst, Mizuho Securities3: Thanks, Kristen. You know, we’re very pleased, as Erik said on the call earlier with the start of the year, right? Volume profitability came in a bit better than we expected. We look towards the balance of the year in our forecast, we are cautiously optimistic in terms of the operating environment going forward. In terms of top-line performance, we are assuming that there’s really no fundamental change in the lower consumer demand environment. For us to achieve the higher end of that, end market demand would have to pick up and improve and contrary to be at the lower end, from that perspective. Fortunately, we do have a very strong innovation pipeline and a commercial pipeline that we’re working with our customers, and that is a big part of the reason why we have confidence in the sales guidance range.

In terms of EBITDA performance, we remain focused on driving profitability, Our guidance range reflect the now inflationary environment that happened post our original guidance in February. The team is fully focused and committed to working with customers now to offset initially through the pricing actions related to surcharges for logistics and energy. That does take some time. As we progress over the course of the year, we will see an improvement there. Any material difference between the 3% and the 8% range really is gonna come from the pricing aspect to offset the inflation. The good thing is that at the same time, we’re working on incremental productivity initiatives. In the event that we have flexibility, we’re working to drive profitability over the course of the year.

All in, you know, while the environment has changed, we are consistent with what we’re trying to achieve and consistent in our outlook for the full year.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Michael Sison with Wells Fargo. Michael, your line is now open.

Edlain Rodriguez, Analyst, Mizuho Securities4: Hey, guys, nice start to the year. you know, just curious, you in the industry, you know, had to raise prices. It’s pretty obvious why. you know, at what point does this inflation flow through to the consumer and start to impact demand? you know, when I run by duty-free, you look at the fragrance prices are pretty, they’re pretty high. just curious, you know, both in the businesses, at what point does demand start to get impacted by the higher prices?

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, Mike. I expect demand to continue to be solid given everything that we’re seeing. In Fine Fragrance, we expect to see continued solid growth for the full year, although less than the double-digit growth we have been seeing. As we discussed, there is a temporary slowdown in Fine Fragrance in the import Middle East due to the factors of what’s going on there. In Consumer Fragrance, we’ve seen the pipeline grow, and we’ve seen lots of interest in our innovation that we’re bringing to the marketplace. Other than the commodity ingredients, which is about half of our Fragrance Ingredients sales, everything else is on a solid base for the full year.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of John Roberts with Mizuho Securities. John, your line is now open.

Edlain Rodriguez, Analyst, Mizuho Securities: Thank you. Good morning, everyone. This is Edlain Rodriguez for John. A quick one on Scent. I mean, the ingredients business continues to be the weak link, it seems like. Like, how should we think about that business now, especially with raw materials going up and the hydrocarbon cost? How are we thinking long term? Like, how should we think about your position being net long, Scent ingredient production?

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, Edlain. Just to reiterate, our Fragrance Ingredients business outside sales is about $500 million a year, and it’s roughly half specialty and half commodity. The specialty side is very attractive, and we’re going to continue to emphasize that part of the business, and we’re going to further strengthen it with a strong R&D pipeline that we have, where we’re driving for both internal formulation use but also external use. We’ll do more here in specialties. We’ll do more in naturals, synthetics, and biotech molecules. On the commodity side, that’s the part that’s very challenged and challenged by Indian producers, Chinese producers. It’s an area that we need to continue to have competitive costs for our internal formulation use, but we’re de-emphasizing sales externally. You’ll see that happen over the coming year or so.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Kevin, your line is now open.

Edlain Rodriguez, Analyst, Mizuho Securities1: Hi, this is Matt Hauer on for Kevin McCarthy. With your balance sheet in better shape and incremental cash flow from the divestiture of Food Ingredients on the come, how are you thinking about capital allocation between stock buybacks, R&D investment, bolt-on M&A opportunities, and new ventures like Alpha Bio?

Edlain Rodriguez, Analyst, Mizuho Securities3: Thanks, Matt, for the question. We remain very disciplined in the terms of our allocation, our capital allocation strategy. Our net debt to EBITDA leverage is 2.5 times, and we’ve recently implemented a share buyback program to offset dilution. I think that came in September, or October of last year, 2025. In the event that we do have an influx of cash and it comes from a potential divestiture, you know, we will look to maintain our net debt to EBITDA leverage plus or minus 2.5 times. Then thinking about use of proceeds really around repurchase opportunities to minimize any potential dilution related to a transaction.

All that being said, at the same time, we will also look to fund organic growth investments that have high return profiles and look to pursue potential bolt-on acquisitions and ventures that create strong shareholder value. I think Erik said discipline a couple times in his couple answers. For me, we will be disciplined on how we allocate capital to ensure we’re generating strong shareholder return.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of David Begleiter with Deutsche Bank. David, your line is now open.

Emily Fusco, Analyst, Deutsche Bank: Good morning. This is Emily Fusco on for David Begleiter. Do you still expect North American health trends to improve starting in the back half of the year with a full recovery in 2027? Thanks.

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, Emily. The short answer is yes. As we said earlier, we expect the first half Health & Biosciences to be flattish and then return to growth in the second half with acceleration into 2027 as our commercial and innovation pipelines deliver with customers. We continue to see that. We’re very pleased with the team we’ve got in place now and all the efforts that they’re making and what we’re hearing back from customers as well.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Joshua Spector with UBS. Josh, your line is now open.

Anojja Shah, Analyst, UBS: Hi. Good morning, everyone. It’s Anojja Shah sitting in for Josh. Thank you for the guidance on Q2, but can you give us a little more detail there, maybe some of the moving parts to get to what you’re guiding to for Q2?

Edlain Rodriguez, Analyst, Mizuho Securities3: Sure. Thank, thanks for the question, Anuj. You know, as you know, we don’t give specifically quarter guidance. We’re really focused on delivering the full year objectives and full year results. To help with modeling, I tried to give some qualitative in my prepared remarks. Maybe I’ll go a little bit deeper here. In Q2, we expect EBITDA to be lower than our Q1 performance. That’s what I said in my prepared remarks. When I think about it, there’s probably 3 drivers. 1, we expect growth to be more moderate in Q2 versus it was in Q1. We also expect to have a bit of an unfavorability in terms of price to input costs.

As we talked about, we’re seeing energy and logistic charges rising. We haven’t really fully implemented our surcharges in place yet. That will happen over the course of the quarter. That will create a bit of a margin pressure in terms of where we are this quarter from Q2. Ultimately, the third part for me is really that Fine Fragrance being under pressure because of the Middle East. There’s a small mix dynamic there. When you shape those together, that was why I tried to dimensionalize Q2 EBITDA will be lower than Q1. As we move through the second half of the year, all three of those various elements should improve.

We’ll, you know, we’ll progress through the year and finish on where we think to be on a full year guidance range.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Laurence Alexander with Jefferies. Laurence, your line is now open.

Laurence Alexander, Analyst, Jefferies: Good morning. Erik, if memory serves, when you first came in, one of your goals for the segments was to recoup the share positions that they used to have with a flat to higher gross margin for each of the subunits. Can you give an update on that strategy? What you’ve seen so far? How long you think it would take to get there? What it could mean over the next 3, 5 years?

Erik Fyrwald, Chief Executive Officer, IFF: Yes. Yeah, sure. Thanks for the question, Laurence. I feel like we’re making very good progress across the company. I think we’ve done a great job of getting to the right portfolio. As you know, the sale of the Food Ingredients process is the next important step in that. When you look at the three future businesses, Health & Biosciences, we continue to make really good progress there in the enzyme areas. The one area that we’re focusing and further improving is Grain Processing in that area, both in enzymes and yeast. It’s a great opportunity. We’re doing well, but we can do even better. Health is the area that we’ve talked about we needed a turnaround.

I think we’re well on our way there with strong leadership, increasingly strong commercial pipeline and a strong innovation pipeline. As I’ve discussed, we see that starting to turn in the back half of this year and into 2027 accelerating. In Scent, I think we’ve got a very strong position in Fine Fragrance. We’ve got some temporary issues we’re working through that we discussed. Consumer Fragrance, we’ve got a very strong team there with a very good pipeline. And then we’ve got an R&D machine that’s really picked up in the last year that takes 18 to 24 months to deliver. We’re seeing the progress in that pipeline that we’ll deliver in 2027 that we’re very excited about.

The real issue in Scent is the commodity ingredients that we talked about, and we’re dealing with that. I think by 2027, we’ll see that go away as a headwind and unleash the full potential of the rest of the Scent business. In Taste, I’m very proud of the team there. We’ve got now a number of quarters of strong performance ahead of the market, and we’ve got a good pipeline there. We’ve got a great team and we see that strong performance continuing. Finally, in Food Ingredients, you know about the sales process, but I think that’s been enhanced by the great performance Andy Muller and his team have delivered. As you recall, in 2023, we had 9% EBITDA margin.

2024, they built it to 12% EBITDA margin. 2025, 13%. This year, I think we’ll exceed 14% EBITDA margin, and that continues to grow and see more opportunity there. As we all said before, as the portfolio was optimized within that organization, focusing on the higher growth opportunity areas, we’ve seen a return to top-line growth there that we expect for the full year. Just overall, I think solid performance, including in productivity. Are we satisfied? No. We’re pleased with the progress, but we know we’ve got so much potential that, you know, we’re creating a bigger ambition across each business, and we expect to realize that in the coming 5 years.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Patrick Cunningham with Citigroup. Patrick, your line is now open.

Edlain Rodriguez, Analyst, Mizuho Securities8: Hi. Good morning. This is Alex on for Patrick. Just curious, with all the different puts and ticks now, what your expectations are for free cash flow in 2026?

Edlain Rodriguez, Analyst, Mizuho Securities3: Hi, Alex. Thanks, thanks for the question. Cash flow improvement for us is a key priority in 2026. For the year, I continue to expect to see a meaningful improvement, really driven by a couple things. 1, improvements in profitability. 2, improvement in working capital. 3, lower interest expense. 4, a lower incentive compensation payout year-over-year versus prior year. That’s a favorability. Fortunately, we’re off to a very good start for the year, but we still have more work to do as we go for the next 3 quarters to making sure we drive to our target. As I explained on our Q4 call, we’ve also added a compensation metric for the entire organization, really based on free cash flow conversion to EBITDA.

Now, not only are we trying to drive it strategically, we are also comping on it to making sure we’re driving really good behavior within the businesses and the overall company. In terms of a specific target, I will reframe on providing a specific target until we have clarity on Food Ingredients, I think. The only thing I will say is that I do expect it to be better in 2026 than it was in 2025, so we will see a year-over-year improvement overall.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Zilka Keck with JP Morgan. Zilka, your line is now open.

Edlain Rodriguez, Analyst, Mizuho Securities7: Hi, good morning. Can you talk about in which segments you think you gained share this quarter, whether it’s in Taste or Health & Biosciences? Can you quantify in some way, like the product launches that are coming in the back half and which areas they, you know, they will come?

Erik Fyrwald, Chief Executive Officer, IFF: Sure. Great question. First of all, I think it’s unhelpful to just look at 1 quarter. I think we’ve got to look at trends over time. I’m very pleased with the progress that we’re making in Health & Biosciences enzymes. Very pleased with the progress we’re making in Health & Biosciences cultures, the Food Biosciences. The area of challenge that we’ve talked about is the health area. I’m pleased with the progress we’re making to turn that around. As I said, we’ll start to see some progress there in numbers in the 2nd half, accelerating into next year. In the Scent side, I think we’ve done very well versus the market in Fine Fragrance. We talked about some temporary challenges there.

On the Consumer Fragrance side, as I’ve talked about before, I think we fell a little bit behind. We’ve now got a really strong team in place, a very strong commercial pipeline, and we’re starting to see that turn, and you’ll see that, I believe, in the second half and again into 2027. We’ve got a really good innovation pipeline in our Scent business that we did not have before. I’m very pleased with that, and you’ll see that starting to manifest in the marketplace later this year, but really with impact in 27 and beyond, in 28 and beyond. In Taste, a very solid performance. We’re performing ahead of the market, and I expect that to continue. We’ve got a very good commercial and innovation pipeline there. We’ve got a great team there.

I expect that to continue. In Food Ingredients, the transformation, the turnaround continues. Performing well against competitors in the different parts of that business, and that’s why we expect the sale process to continue to go well. Overall, very pleased. We’ve got a couple of areas in there, the commodity Scent Ingredients, the Health & Biosciences that we continue to have to get back to performing ahead of the market in Health & Biosciences and deal with our commodity Scent Ingredients business. We’re making progress in all those areas. Pleased but not satisfied. More to do.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Christopher Parkinson with Wolfe Research. Christopher, your line is now open.

Harris, Analyst, Wolfe Research: It is Harris on for Chris. Thanks for taking my question. On the Taste margins, they came in a fair bit better than we were expecting on, say, not a huge amount of organic growth. Can we just zoom in on what’s happening there? Is it productivity? Is it maybe pricing’s a little ahead there? Modulation mix? Just how should we be thinking about that? Thanks.

Edlain Rodriguez, Analyst, Mizuho Securities3: Sure. Great question. Thanks, Harris, for that. Really, when I think about the Taste business, they have been doing very well in terms of overall growth performance. Quarter after quarter, whether you compare versus competition or just historical trends, they’re continuing to deliver across the board predicated on really good volume growth, and the team has been driving that. At the same time, they’ve been driving pricing, which has been favorable in terms of net raw material cost. That is also a secondary piece that’s really helping. Not only volume leverage, you’re having a favorability in terms of net price to input costs. Third is really around productivity. The team has done a really good job at being very disciplined in trying to drive productivity throughout the business. That’s helped support margin performance.

As I think about Q1 performance on a go-forward basis, timings of inventories and some of that stuff, I think it will abate in terms of that leverage that you saw. 18% currency neutral EBITDA growth is very, very high. I wouldn’t expect that on a go-forward basis, and it will normalize. They’ve done a very good job, just the hand they were dealt from a Q1 standpoint to deliver.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. Our next question comes from the line of Kate Grafstein with Barclays. Kate, your line is now open.

Kate Grafstein, Analyst, Barclays: Thanks. As you start to have pricing discussions with your customers. Are you noticing any pushback? Also, at what level of pricing would you need to offset the expected inflation over the next 12 months? I have a follow-up thereafter.

Edlain Rodriguez, Analyst, Mizuho Securities3: Maybe I’ll start, Erik, feel free. I had the fortune to actually run pricing in our Taste for a couple of years in my career at IFF. I will say nothing is fundamentally different. Conversation on pricing is always a give or take relationship. What’s really, really important, though, is you go and engage based on facts. What you see from a market standpoint today, nobody can refute logistics, energy, increases overall. We’re really having the tactical conversations specifically on that. We also wanna collaborate with our customers. We can offer solutions to help them reduce costs by reformulating, doing different types of things, we are absolutely more than willing to do so. Those are the types of conversations we’re having now.

Nothing is better or worse than where it’s been. It’s kind of consistent to the historical norms. In terms of the level of pricing, I think the way I would kind of categorize it, and I’ll refrain from giving too many specifics, I think there’s probably a modest benefit, or increase in terms of overall price to this year as we work through really on the logistics, and energy piece to it. As we go forward, we’re really focused on the raw material piece, and as we go in the back half of this year and really into 2027, we got to get our heads around that and start working with our customers there. That’s the way we’re treating it.

It’s modest, Katie, the next couple of quarters in terms of overall price, but I think it will build over time as we progressively move forward.

Erik Fyrwald, Chief Executive Officer, IFF: Let me just add that having trust with our customers is really important to us. We’re being very clear that we’re not trying to take advantage of this to take advantage of this and increase our margins. We’re trying to just pass through the cost increases we’re seeing from these higher costs and being very clear about the costs. Where we’re trying to drive our margin improvement is through great innovation that customers love and help them profitably grow and through productivity.

Edlain Rodriguez, Analyst, Mizuho Securities6: Katie, do you have a follow-up?

Kate Grafstein, Analyst, Barclays: Yeah. I just wanted to ask on the productivity piece, I guess. It’s been very strong. It was strong last year, strong this quarter. Is it possible to accelerate the productivity as another lever, you know, if pricing doesn’t come through as strong as you expect?

Edlain Rodriguez, Analyst, Mizuho Securities3: Yeah. I think the answer is yes. I think you can always look at the organization. You can always look for incremental opportunities. We have a long-term productivity plan that the teams are working on as they think about their margin evolution. In terms of the short term, if there is a short-term pressure, we should have levers that we can pull and try to drive in terms of incremental productivity to help minimize any potential gaps. First and foremost, really focused on making sure we get those surcharges in place. Then as we progress over the course of the year, we will consider whatever we need to do in terms of productivity to cover it.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. At this time, I would now like to turn the conference call back over to Erik for any closing remarks.

Erik Fyrwald, Chief Executive Officer, IFF: Thanks, everybody, for joining. I just wanna summarize by saying that, two years ago, we laid out our planned direction. We’re executing well, doing what we said we would do. We’ve said we would drive our commercial pipelines, our innovation pipelines. That’s happening. That we would deliver on productivity. That’s happening. I am very proud of team IFF all around the world making this happen. Let me just close by saying that we love our customers, and we love bringing them leading innovation that helps them drive profitable growth and enables us to also profitably grow. Thank you.

Edlain Rodriguez, Analyst, Mizuho Securities6: Thank you. That will conclude the IFF first quarter 2026 earnings conference call. Thank you for your participation. You may now disconnect your lines.