International Flavors & Fragrances Inc. (IFF) Earnings & Analysis

Latest quarter

IFF reported Q2 FY2026 revenue of $2.0 billion, above the $1.9 billion consensus. Its adjusted earnings per share were $0.82, compared with the $0.78 consensus.

Revenue was $2.0 billion, compared with $2.8 billion a year earlier. CFO Michael DeVeau said revenue from continuing operations rose roughly 6%, driven by volume across the businesses IFF is keeping. He said Taste sales grew 4%, Health & Biosciences grew 5% and Scent grew 8%. DeVeau also said Food Ingredients grew 3% in the quarter; IFF has agreed to sell that business.

IFF reported diluted earnings per share of $0.20, compared with $2.38 a year earlier. Its gross margin was 43.7%, compared with 29.8%, while its operating margin was 8.09%, compared with 5.14%. The company reported free cash flow of $284.0 million, up from $146.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the August earnings call, CEO Erik Fyrwald said consumer demand had been resilient despite inflation and uncertainty, although he acknowledged that conditions could change. CFO Michael DeVeau said second-quarter growth across the continuing businesses was almost entirely volume-driven, with little contribution from pricing.

Asked about Scent, DeVeau said fragrance ingredients grew north of 20%, helped partly by a lower year-earlier comparison and by sales of synthetic ingredients amid supply disruptions. He expected that growth to normalize. He also said fine fragrance finished the quarter slightly positive despite the Middle East conflict, and expected a softer third quarter before some recovery in the fourth.

DeVeau expected modestly higher raw-material, energy and logistics costs in the second half, with Scent most affected. He said IFF was working with customers on surcharges, but that pricing recovery in Scent could lag costs into early 2027. Fyrwald said the company was also pursuing productivity projects.

On the Food Ingredients divestiture, Fyrwald said IFF expected about $100 million of corporate and functional costs previously allocated to the business to remain after closing. He expected about two-thirds to be eliminated in the first 12 months after closing and the rest in the second full year. He said the transaction remained on track to close by the end of the second quarter of 2027.

Asked about competition in China, Fyrwald said IFF had increased research and development spending in its remaining businesses to about 9% of sales and would continue increasing spending as sales grow. DeVeau said capital expenditure would likely be near the upper end of a 5% to 6% range of sales over the next one or two years.

DeVeau said separation-related working-capital demands could be a couple hundred million dollars, but he still expected full-year free cash flow to exceed 2025. He said the ultimate impact would depend on the timing of the Food Ingredients separation.

Guidance

In its November release, IFF said it expected FY2026 sales of $7.5 billion to $7.6 billion, versus $7.4 billion to $7.6 billion previously. It expected adjusted operating EBITDA of $1.55 billion to $1.60 billion, versus $1.53 billion to $1.60 billion previously.

On a continuing-operations basis, IFF expected comparable currency-neutral sales growth of 3% to 4%, versus 2% to 4% previously, and comparable currency-neutral adjusted operating EBITDA growth of 5% to 8%, versus 4% to 8% previously.