Executive Summary

International Flavors & Fragrances (IFF) is at a critical inflection point in its 135-year history.¹ Following its transformative, industry-redefining merger with DuPont’s Nutrition & Biosciences (N&B) business in 2021, the company has navigated a period of significant operational and financial challenges. These have included complex integration, severe customer inventory destocking, persistent raw material inflation, and macroeconomic headwinds that have tested the strategic rationale of the combination. In response, a new leadership team is now executing a comprehensive strategic overhaul focused on aggressive portfolio simplification, renewed operational discipline, and urgent balance sheet deleveraging.

This report provides a comprehensive analysis of IFF’s current strategic position. It will assess the effectiveness of this nascent turnaround strategy, evaluate the underlying strength and profitability of IFF’s core business segments against its primary global competitors, and map the company’s path toward restoring financial stability and achieving predictable, sustainable growth. The analysis highlights the company’s highly leveraged balance sheet as its primary constraint and a key driver of recent strategic decisions, including a significant dividend reduction and a series of major business divestitures. Concurrently, the report examines IFF’s resilient, albeit recently volatile, cash flow generation and the potential for its world-class research and development platform to capitalize on long-term consumer trends in health, wellness, and sustainability. Key opportunities lie in leveraging its expanded innovation capabilities and capturing synergies across a more focused portfolio. However, significant risks remain, centered on the successful execution of the turnaround plan, intense competitive pressures in a concentrated market, and the inherent volatility of raw material costs and global supply chains.

Company Overview & Evolved Business Model

Following the merger with DuPont N&B, IFF emerged as a global leader in high-value ingredients and solutions, with a vastly expanded portfolio and market presence.² The combination created an entity with pro forma 2020 revenues exceeding $11 billion, serving approximately 18,000 customers across the Food & Beverage, Home & Personal Care, and Health & Wellness end markets.¹ As of early 2025, the company’s operations are structured into four primary segments, though this is undergoing strategic review and simplification.

Core Business Segments

• Nourish: Historically IFF’s largest segment, Nourish was formed by combining the legacy IFF Flavors business with a substantial portion of DuPont’s food and beverage ingredients portfolio. Its offerings are extensive, encompassing flavor compounds, natural-based ingredients, texturants, food protection solutions, emulsifiers, sweeteners, and plant-based proteins.³ The sheer breadth of this segment, however, created operational complexity and masked diverging performance trends. In a significant strategic shift, IFF began reporting Nourish as two distinct units—Taste and Food Ingredients—starting in the first quarter of 2025.⁶ This change immediately clarified the segment’s performance: in Q1 2025, the Taste business delivered strong comparable currency-neutral sales growth of 7%, while the Food Ingredients business declined by 4%, primarily due to persistent weakness in protein solutions.⁶ This formal separation acknowledges that the original post-merger structure was too diverse to manage effectively and is a precursor to a more focused strategy for each sub-unit.
• Scent: This segment represents IFF’s traditional and highly profitable fragrance business. It creates and manufactures fragrance compounds, proprietary fragrance ingredients, and cosmetic active ingredients for a wide array of products, including fine fragrances, personal and home care items, and beauty products.³ The Scent segment has been a consistent source of strength, delivering 12% comparable currency-neutral sales growth for the full-year 2024 and 4% in Q1 2025, driven by double-digit growth in the high-margin Fine Fragrance category.⁶
• Health & Biosciences (H&B): Comprised largely of assets from the DuPont N&B portfolio, this segment is a leader in biotechnology-derived products. Its portfolio includes enzymes, food cultures, probiotics, and other specialty ingredients for both food and non-food applications, such as animal nutrition and home and personal care products.³ H&B has demonstrated resilient performance, with comparable currency-neutral sales growing 5% in Q1 2025, led by its Health and Food Biosciences businesses.⁶
• Pharma Solutions: This specialized segment produces cellulosics and seaweed-based pharmaceutical excipients, which are critical functional ingredients for the pharmaceutical industry.⁴ The business has performed well, posting 8% comparable currency-neutral sales growth in Q1 2025.⁶ Despite its strong performance, IFF has announced its intention to divest the Pharma Solutions segment as part of its broader portfolio optimization and deleveraging strategy.⁹

Value Chain Positioning and Business Model Economics

IFF operates at a critical juncture in the consumer goods value chain, acting as an innovation and “co-creation” partner for the world’s largest consumer packaged goods (CPG) companies.¹¹ Its flavors, fragrances, and functional ingredients typically represent a small fraction of a finished product’s total cost but are fundamental to its sensory profile, performance, and consumer appeal. This dynamic creates a “sticky” business model with high switching costs for customers, as reformulating a successful product to change a key ingredient is both risky and expensive.¹³

However, the theoretical strength of this model has been tested by post-merger execution issues. The operational challenges experienced in 2022 and 2023, including supply chain disruptions and inconsistent service levels, likely strained customer relationships and undermined the “essential partner” value proposition. These internal difficulties contributed to the severity of the customer destocking cycle that IFF experienced, which appeared more pronounced than at some key competitors. This suggests that the issues were not purely market-driven but were exacerbated by IFF’s own operational shortcomings, which may have prompted customers to reduce their reliance on the company or diversify their supplier base, temporarily weakening IFF’s competitive moat.

Geographic Distribution

The company’s operations are geographically diverse, providing a natural hedge against regional economic downturns but also creating significant exposure to foreign currency fluctuations. In 2024, sales in the United States accounted for approximately 28% of the company’s total, with no other single country representing more than 10% of sales.³ This global footprint is essential for serving multinational clients and capturing growth in emerging markets.

Table 1: IFF Segment Performance Summary

Segment Name	Sales FY 2023 ($M)	Sales FY 2024 ($M)	Sales Q1 2025 ($M)	Comp. Currency-Neutral Sales Growth FY 2024 (%)	Comp. Currency-Neutral Sales Growth Q1 2025 (%)	Adj. Operating EBITDA Margin FY 2024 (%)	Adj. Operating EBITDA Margin Q1 2025 (%)
Nourish (Total)	7,362	5,870	1,423	4%	N/A	14.0%	N/A
Taste	N/A	N/A	627	N/A	7%	N/A	20.9%
Food Ingredients	N/A	N/A	796	N/A	-4%	N/A	13.9%
Scent	2,382	2,440	614	12%	4%	21.2%	23.5%
Health & Biosciences	2,080	2,190	540	8%	5%	28.3%	25.6%
Pharma Solutions	945	984	266	6%	8%	21.1%	20.3%
Total IFF	11,479	11,484	2,843	6%	3%	19.2%	20.3%
Note: FY 2023 and FY 2024 figures for Nourish are presented as a single segment as reported by the company for those periods. Q1 2025 reflects the new reporting structure. Total IFF sales figures are as reported and may differ from the sum of segments due to rounding and intersegment eliminations. Margins are calculated based on provided sales and adjusted operating EBITDA figures.
Data Sources: 6

Industry Dynamics & Competitive Landscape

IFF operates within the global flavors and fragrances (F&F) industry, a large and defensive market intrinsically linked to non-discretionary consumer staples such as food, beverages, and household and personal care products. The market is characterized by steady growth, high barriers to entry, and an oligopolistic structure.

Market Size and Growth Drivers

The global F&F market size is estimated to be between $35 billion and $40 billion for 2024-2025, with various market research firms projecting a compound annual growth rate (CAGR) in the range of 3.7% to 5.4% through 2030.¹⁷ This growth is underpinned by several durable trends:

• Demand in Emerging Markets: Urbanization, rising disposable incomes, and the expansion of a middle-class consumer base in regions like Asia Pacific are fueling demand for packaged foods and branded consumer goods.¹⁸
• Health and Wellness: A powerful consumer-driven shift toward healthier lifestyles is increasing demand for functional ingredients, natural flavors, and solutions that enable the reduction of sugar, salt, and fat in food products without compromising taste.¹³
• Natural and Sustainable Ingredients: Consumers are increasingly demanding clean-label products with natural and sustainably sourced ingredients. This trend is a major focus for R&D and innovation across the industry, favoring large-scale players with the capital and scientific expertise to develop these complex ingredients.¹⁷
• Convenience and Processed Foods: The continued demand for convenient, ready-to-eat meals and snacks drives the need for sophisticated flavor and texture systems to enhance the sensory experience of processed foods.¹⁷

Competitive Structure

The F&F industry is highly concentrated, with the top four global players—Givaudan, dsm-firmenich, IFF, and Symrise—commanding approximately two-thirds of the market.¹⁴ This oligopolistic structure creates formidable barriers to entry, which include:

• Scale and Global Reach: The ability to serve large multinational CPG clients across the globe is essential.
• R&D Intensity: Sustained, significant investment in research and development is required to create novel ingredients and proprietary technologies.
• Customer Intimacy: Deep, long-standing relationships with customers, often involving co-development of products, are difficult for new entrants to replicate.
• Regulatory Expertise: Navigating the complex and varied global regulatory landscape for food and cosmetic ingredients requires significant resources.

The competitive landscape has intensified following the 2023 merger of DSM and Firmenich, which created a third powerhouse competitor alongside Givaudan and the enlarged IFF. This development leaves less room for operational error. IFF is now competing against two well-integrated, highly profitable leaders in Givaudan and dsm-firmenich. In this context, IFF’s post-merger execution stumbles are particularly damaging, as customers have two other highly capable global partners to which they can turn, putting immense pressure on IFF’s new management to execute its turnaround flawlessly to regain lost ground.

Table 2: Competitive Landscape Analysis (“Big 4” Peer Comparison)

Metric	IFF	Givaudan	dsm-firmenich	Symrise
Ticker	IFF	GIVN.SW	DSFIR.AS	SY1.DE
Market Cap ($B)	~$19.4	~$41.0	~$24.2	~$14.3
Revenue LTM ($B)	~$11.4	~$8.1	~$14.7	~$5.2
Revenue Growth LTM (%)	-0.5%	7.2%	1.0%	3.1% (H1’25 Organic)
Adj. EBITDA Margin LTM (%)	~19.2%	~23.8% (FY’24)	~18.0%	~21.7% (H1’25)
Net Debt / EBITDA	~3.9x	~2.2x (H1’25)	~2.5x (H1’25)	~2.4x (H1’25)
EV / EBITDA (LTM)	~16.3x	~22.0x – 26.1x	~10.5x – 16.6x	~14.2x – 15.7x
Forward P/E	~16.4x	~32.4x	~20.8x	~22.0x
Note: Data as of mid-2025. Market caps and financial data are subject to currency fluctuations and market changes. Revenue growth for Symrise is organic. LTM EBITDA margin for IFF is based on FY 2024 results. Peer multiples are sourced from a range of providers and may vary. dsm-firmenich data reflects the newly merged entity.
Data Sources: 8

Financial Performance & Capital Allocation Strategy

An examination of IFF’s financial performance over the past decade reveals a story of dramatic, acquisition-fueled transformation. This growth has come at the cost of a heavily burdened balance sheet and compressed profitability, fundamentally altering the company’s financial profile and necessitating a sharp pivot in its capital allocation strategy.

Revenue and Profitability Trajectory

IFF’s reported net sales surged from approximately $3.0 billion in 2015 to $11.5 billion in 2024.³⁹ This more than threefold increase was not organic but was driven almost entirely by two major acquisitions: Frutarom in 2018 and the transformative merger with DuPont’s N&B business in 2021. While these deals delivered immense scale, they also introduced significant complexity and lower-margin businesses into the portfolio.

This shift is evident in the company’s profitability metrics. Gross margins, which were consistently in the 43-45% range prior to the Frutarom acquisition, have since compressed, settling at 35.9% in 2024.³⁹ This structural change reflects the integration of DuPont’s large-scale ingredients businesses, which operate at lower gross margins than IFF’s legacy flavor and fragrance compounds.

On a GAAP basis, operating income and net income have been decimated in recent years by massive non-cash goodwill impairment charges. The company recorded operating losses of $2.1 billion in 2023 and $1.3 billion in 2022, primarily due to writing down the value of acquired assets.³⁹ These accounting charges are a direct admission that the price paid for these acquisitions has not generated the returns originally anticipated.

On an adjusted basis, which excludes impairments and other special items, the profitability gap with peers is clear. IFF’s adjusted operating EBITDA margin of 19.2% in 2024 lags that of Givaudan (23.8%) and Symrise (20.7%), highlighting a persistent need for operational improvement and cost efficiencies.⁸ The combination of lower margins, higher earnings volatility, and significant asset write-downs demonstrates a fundamental change in the company’s financial profile from a high-quality compounder to a more complex, lower-return industrial entity undergoing a major turnaround.

Table 3: Historical Financial Summary (2015-2024)

Fiscal Year	Revenue ($M)	Gross Profit ($M)	Gross Margin (%)	Operating Income (GAAP, $M)	Adj. Operating EBITDA ($M)	Total Debt ($M)	Total Equity ($M)	Debt/Equity Ratio
2024	11,484	4,124	35.9%	1,112	2,210	9,363	13,764	0.68
2023	11,479	3,681	32.1%	(2,111)	1,980	10,071	15,129	0.67
2022	12,440	4,151	33.4%	(1,326)	2,570	10,545	18,977	0.56
2021	11,656	3,735	32.0%	585	2,400	11,126	21,304	0.52
2020	5,084	2,086	41.0%	566	1,020	4,524	7,654	0.59
2019	5,140	2,113	41.1%	665	1,110	4,499	7,725	0.58
2018	3,978	1,683	42.3%	545	860	4,324	3,369	1.28
2017	3,399	1,472	43.3%	553	750	1,387	3,450	0.40
2016	3,116	1,396	44.8%	553	720	1,330	3,184	0.42
2015	3,023	1,352	44.7%	588	710	1,273	3,086	0.41
Note: Adjusted Operating EBITDA is a non-GAAP measure provided by the company in various filings and presentations. Figures for some years are derived from company reports and may be subject to slight variations based on calculation methods.
Data Sources: 8

Capital Allocation and Balance Sheet Management

The acquisitions of the last decade have left IFF with a substantial debt burden. Total debt stood at $9.36 billion at the end of 2024, a dramatic increase from $1.27 billion at the end of 2015.⁴¹ This high leverage became the company’s primary financial constraint, forcing a radical shift in capital allocation priorities away from shareholder returns and toward debt reduction.

This shift was most starkly illustrated by the decision to cut the quarterly dividend by 50% in late 2023, from $0.81 to $0.40 per share, effective for payments in 2024.⁴² This move was not merely a strategic choice but a necessity, directly linked to the company’s negotiations with lenders to amend its credit facility and gain relief from its financial covenants.¹⁶ The amended agreement explicitly restricted dividend payments and prohibited share repurchases until leverage targets are met.¹⁶ This demonstrates the severity of the financial strain the company was under, forcing it to trade shareholder returns for financial flexibility and the avoidance of a potential covenant breach.

The company’s primary focus is now on deleveraging its balance sheet, with a stated goal of reaching a Net Debt to Credit Adjusted EBITDA ratio of below 3.0x.⁴³ The main levers to achieve this are free cash flow generation and proceeds from the ongoing portfolio divestiture program.

The Transformative DuPont Merger: Integration & Realignment

The February 2021 merger with DuPont’s Nutrition & Biosciences business was a “bet the company” transaction that more than doubled IFF’s size and fundamentally altered its strategic scope. The deal, structured as a Reverse Morris Trust, involved a $7.3 billion cash payment to DuPont, with DuPont shareholders receiving 55.4% of the combined entity.²

Strategic Rationale and Synergy Targets

The strategic logic was compelling on paper: to create an unparalleled global leader in high-value ingredients, combining IFF’s strength in “taste” and “scent” with N&B’s leadership in “texture,” “nutrition,” and “health”.² The combined entity would possess #1 or #2 market positions in numerous attractive categories and a best-in-class R&D platform to capitalize on consumer trends toward healthier, more sustainable products. Management sold the vision of an integrated solutions provider capable of serving customers from concept to commercialization. The company targeted achieving $400 million in run-rate revenue synergies by the end of 2023 through cross-selling opportunities.⁴⁵

Integration Challenges and Strategic Retreat

The reality of the post-merger period proved far more challenging than the vision. The years 2022 and 2023 were marked by significant operational disruptions, including supply chain inefficiencies, poor customer service levels, and the immense difficulty of integrating two distinct corporate cultures and complex global systems.⁴⁶ These internal struggles exacerbated the impact of external headwinds like inflation and customer destocking, leading to poor financial performance and a collapse in the company’s stock price.

The sheer scale of the transaction and the subsequent operational failures are starkly reflected in the company’s financial statements. IFF has recorded multi-billion-dollar goodwill impairment charges in 2023 and 2025, a direct accounting admission that the company overpaid for the N&B assets or has been unable to extract their expected value.⁶ These write-downs represent a permanent destruction of the shareholder equity used to fund the deal and are a lagging indicator of a flawed M&A execution.

In response to the crisis, the company’s strategy has pivoted dramatically. The aggressive portfolio divestiture program represents a strategic retreat from the “integrated solutions” powerhouse vision. Management is now prioritizing debt reduction and operational focus over breadth, effectively dismantling parts of the combined entity to stabilize the core. This strategic shift is most evident in the decision to sell the high-performing Pharma Solutions business, a move that clearly trades a source of future growth for immediate balance sheet repair.⁹ This indicates that the strategic imperative has shifted from synergy and integration to financial resilience and simplification. The “bigger is better” thesis has been replaced by a “better is better” reality.

The divestiture program has included the sales of:

• Microbial Control
• Savory Solutions
• Flavor Specialty Ingredients
• Cosmetic Ingredients (Lucas Meyer Cosmetics)
• Nitrocellulose ⁴⁵

The sale of the Pharma Solutions business is the largest of these moves and is expected to close in mid-2025, with proceeds dedicated to paying down debt.⁹

Growth Opportunities & Strategic Imperatives

Despite the recent challenges, IFF possesses several avenues for future growth, anchored by its formidable R&D capabilities and market-leading positions in core categories.

Innovation as a Core Driver

R&D remains the lifeblood of the F&F industry, and IFF is a major investor in innovation, with an annual budget of approximately $671 million and over 40 strategic university partnerships.¹ The new leadership team has identified strengthening the innovation pipeline as a key priority for 2025, signaling a strategic reinvestment in this core capability after a period of integration-related disruption.⁸ In an oligopolistic market where true differentiation comes from proprietary technology, IFF’s ability to develop novel solutions for powerful consumer trends represents its most defensible long-term competitive advantage. Recent innovations targeting the needs of GLP-1 consumers and the launch of new sustainable technologies like ENVIROCAP™ for fabric care demonstrate an agile R&D function focused on high-growth niches.⁴⁹

Leveraging Consumer Trends

IFF’s broad portfolio is well-positioned to capitalize on several long-term consumer megatrends:

• Health & Wellness: The H&B and Nourish segments offer a wide range of products, including probiotics, enzymes, and plant-based proteins, that cater to growing consumer focus on health.
• Sustainability: The Scent division’s focus on green chemistry and renewable ingredients, along with the broader company’s commitment to responsible sourcing, aligns with consumer and customer demands for more sustainable products.¹²
• Natural Ingredients: The shift away from synthetic ingredients continues to be a powerful tailwind for the industry, benefiting players like IFF with strong capabilities in natural extracts and biotechnology.¹⁷

Cross-Selling and Emerging Markets

While the grand vision of seamless cross-selling across the entire merged portfolio has been tempered by reality, opportunities still exist within a more focused portfolio. The ability to offer a customer in the beverage space both a flavor solution from the Taste division and a texturant or culture from the H&B division remains a potential, albeit challenging, growth lever. The operational turmoil of recent years has likely made achieving significant cross-selling wins difficult, making this a “show-me story” that depends on first achieving consistent operational stability.

Emerging markets, particularly in Asia, continue to offer the highest growth potential for the industry.¹⁸ IFF’s long-standing investments in these regions, including a new state-of-the-art office in Hyderabad, India, position it to capture this growth as consumer demand for packaged goods continues to expand.⁴⁸

Analysis of Recent Challenges & Headwinds (2022-2024)

The period from 2022 through early 2024 was one of the most challenging in IFF’s history, defined by a confluence of external macroeconomic pressures and significant self-inflicted operational wounds.

The Destocking and Inflationary “Perfect Storm”

The most significant headwind in 2023 was an unprecedented wave of customer inventory destocking across the consumer goods industry. After building up safety stocks during the supply chain chaos of 2021-2022, customers aggressively reduced their inventory levels in 2023, leading to a sharp drop in volumes for suppliers like IFF. This was particularly acute in the Nourish (specifically Functional Ingredients) and Pharma Solutions segments.⁴⁷

However, attributing the downturn solely to customer destocking is an incomplete narrative. IFF’s own internal decision to aggressively reduce its own inventory created a negative feedback loop. This led to lower production volumes at its manufacturing facilities, resulting in “unfavorable manufacturing absorption”—a sharp increase in per-unit production costs that directly compressed gross margins.¹⁵ This operational inefficiency, likely stemming from poor forecasting during the chaotic post-merger period, compounded the revenue decline with a self-inflicted margin squeeze.

Simultaneously, the company grappled with persistent inflation in raw materials, energy, and logistics.⁴⁶ While IFF implemented significant pricing actions to offset these costs, the combination of falling volumes and higher manufacturing costs proved overwhelming for profitability.

Financial Pressures and Strategic Consequences

The operational downturn placed immense pressure on IFF’s highly leveraged balance sheet. The sharp rise in global interest rates significantly increased the cost of servicing its substantial variable-rate debt, with annual interest expense climbing from $336 million in 2022 to $380 million in 2023.³⁹ This financial strain, coupled with the underperformance of the acquired N&B assets, culminated in the company taking massive non-cash goodwill impairment charges, totaling $2.6 billion in Q4 2023 and an additional $1.15 billion in Q1 2025.⁶ These write-downs, while non-cash, represent a stark acknowledgment that the economic value of the acquired businesses was far lower than originally projected. The period was also marked by significant management turnover, including the departure of the CEO who led the DuPont merger, creating further uncertainty about the company’s strategic direction.¹¹

Operational & Strategic Developments

In response to the profound challenges of the post-merger period, IFF has embarked on a comprehensive operational and strategic overhaul under new leadership.

New Leadership and a Classic Turnaround Playbook

Erik Fyrwald was appointed CEO in early 2024, bringing a reputation as a disciplined operator from his time at Syngenta and Univar.¹¹ His initial actions and strategic priorities reflect a classic turnaround playbook: simplify the portfolio, stabilize operations and the balance sheet, and then reinvest for growth. This has involved a significant refresh of the executive team and the board of directors to bring in new perspectives.⁴⁸

The core of the new strategy is a relentless focus on portfolio rationalization. The primary goal is to divest non-core or underperforming assets to accelerate the reduction of debt and allow management to focus resources on a more streamlined and profitable core business.¹⁰ This strategy marks a clear departure from the previous “bigger is better” ethos.

Restructuring, Cost Reduction, and Reinvestment

The company is implementing a new, more customer-centric operating model and has initiated productivity programs designed to create a leaner cost structure.⁴³ After a period of intense focus on integration and cost-cutting, a key priority for 2025 is to strategically reinvest in core capabilities. Management has explicitly signaled plans to increase investment in R&D, commercial teams, and manufacturing capacity to reinvigorate organic growth.⁸ This sequence—stabilize the balance sheet first, then reinvest for growth—is a well-established turnaround methodology, and its successful execution is now the central question for the company’s future.

The divestiture of the Pharma Solutions business is a pivotal element of this strategy. Selling a high-performing, high-margin business is a difficult but necessary choice, demonstrating that repairing the balance sheet is the absolute top priority, even at the expense of a quality asset. This move will make IFF smaller but financially healthier and operationally simpler, reflecting a strategic trade-off of near-term growth for long-term stability.

Valuation Considerations

IFF’s valuation has been significantly impacted by its operational and financial struggles, creating a notable discount relative to its historical trading ranges and its highest-quality peers. The market currently appears to be valuing IFF as a complex turnaround story rather than the premium-quality compounder it was once considered.

Historical and Current Trading Multiples

Historically, IFF commanded premium valuation multiples. However, since the DuPont N&B merger, these multiples have become volatile and depressed.

• P/E Ratio: On a trailing-twelve-month GAAP basis, the P/E ratio is negative due to the large impairment charges that have resulted in net losses.⁵³ On a forward-looking basis, using analyst estimates for adjusted earnings, the stock trades in a range of 16x to 18x.²⁷ This is a substantial discount to its pre-merger historical levels, which were often in the 20x to 30x range.⁵³
• EV/EBITDA Ratio: The company’s last-twelve-months (LTM) EV/EBITDA multiple stands at approximately 16.3x.²⁸ This is well below the post-merger peak of 25.9x reached in 2021 but remains above the lows seen in 2020.²⁸

Peer Group Comparison

The valuation discount is most apparent when compared to its closest peer, Givaudan. Givaudan consistently trades at a premium EV/EBITDA multiple of 22x or higher, reflecting its track record of superior, consistent execution and higher profitability.³⁰ IFF’s lower multiple is a direct reflection of the market’s pricing-in of higher execution risk, a more leveraged balance sheet, and lower-quality earnings. Symrise trades at a multiple closer to 14x-15x, while the newly formed dsm-firmenich has a more varied range as the market digests its new structure.²⁹ The investment case for IFF hinges on its ability to close this valuation gap with Givaudan as its turnaround plan progresses.

Sum-of-the-Parts (SOTP) Framework

A sum-of-the-parts analysis is a particularly relevant framework for valuing IFF, given the distinct characteristics of its business segments and the active divestiture program. This approach suggests potential hidden value within the conglomerate structure. The high-quality Scent business, with its strong margins and brand equity, would likely command a premium multiple closer to Givaudan’s if it were a standalone entity. Conversely, the more commoditized and volatile parts of the Food Ingredients business would likely be valued at a lower multiple. The ongoing divestiture program is a practical step toward unlocking this value by crystallizing the market price for certain assets. However, this process also creates uncertainty regarding potential “stranded costs” and the ultimate profitability of the remaining “New IFF” once the portfolio is reshaped.

Key Valuation Drivers

The future trajectory of IFF’s valuation will be driven by three primary factors:

1. Deleveraging Progress: The speed and success of debt reduction is the most critical variable. Achieving the company’s target of <3.0x Net Debt/EBITDA would significantly de-risk the equity and likely lead to a multiple re-rating.
2. Margin Recovery: A demonstrated ability to restore adjusted operating EBITDA margins, particularly in the underperforming Nourish segment, to levels more competitive with peers is essential.
3. Return to Sustainable Growth: Re-establishing a track record of consistent, predictable organic volume growth after the recent period of volatility is crucial for rebuilding investor confidence.

Risk Factors & Concerns

An investment in International Flavors & Fragrances involves exposure to a range of significant risks, which have been heightened by the company’s recent strategic actions and financial condition. These risks are detailed in the company’s regulatory filings and can be categorized into financial, strategic, and external factors.¹⁶

Financial Risks

• High Debt Levels: This is the most pressing risk. As of year-end 2023, total debt stood at $10.1 billion.¹⁶ This substantial leverage constrains financial flexibility, limits the capacity for future investments and shareholder returns (dividends are currently restricted and buybacks are suspended), and increases vulnerability to economic downturns and rising interest rates.¹⁶ Strict adherence to the terms of its amended credit covenants is paramount.

Strategic and Operational Risks

• Execution Risk: The company is in the midst of a complex, multi-year strategic transformation. There is significant risk that the turnaround plan, including the execution of large-scale divestitures and the implementation of a new operating model, may not deliver the expected benefits in the desired timeframe, or at all.¹⁶
• Integration and Cultural Challenges: Despite the merger closing in 2021, lingering challenges in fully integrating the systems, processes, and cultures of IFF and DuPont N&B could continue to hamper operational efficiency, employee morale, and innovation.
• Competition: The F&F industry is intensely competitive, dominated by a few large, well-capitalized players. Any missteps by IFF in execution, innovation, or customer service could result in a permanent loss of market share to highly capable competitors like Givaudan and dsm-firmenich.¹⁶

External Risks

• Raw Material and Input Cost Volatility: IFF’s profitability is sensitive to price fluctuations in a wide range of natural and petrochemical-based raw materials, as well as energy and logistics costs. The inability to pass on cost increases to customers can lead to significant margin compression.¹⁶
• Customer and End-Market Dynamics: A significant portion of sales is concentrated among large CPG customers (the top 25 accounted for 32% of sales in 2023).⁵⁵ Consolidation among these customers can increase their negotiating power. Furthermore, a downturn in global consumer spending could reduce demand for end products containing IFF’s ingredients.¹⁶
• Regulatory Environment: The food, cosmetic, and pharmaceutical ingredient industries are subject to stringent and constantly evolving safety and environmental regulations across numerous jurisdictions. Changes in regulations could require costly product reformulations or the discontinuation of certain ingredients.¹⁶
• Foreign Exchange Exposure: With the majority of its revenue generated outside the United States, IFF’s reported financial results are significantly exposed to fluctuations in foreign currency exchange rates.¹⁶

Balance Sheet & Liquidity Analysis

A thorough analysis of IFF’s balance sheet and liquidity is critical to understanding its financial stability and its capacity to execute its strategic turnaround. The company’s financial position is defined by its high leverage, but it maintains adequate near-term liquidity.

Debt Structure and Maturity Profile

As of December 31, 2023, IFF’s total debt was approximately $10.1 billion, comprised of a mix of term loans, senior unsecured notes, and commercial paper.¹⁶ The proceeds from the merger with N&B were used to fund the $7.3 billion cash payment to DuPont, which is the primary source of the current debt load. The company has actively managed this debt, making voluntary repayments when possible, such as paying off its 2024 Term Loan Facility in early 2024.¹⁶ However, the maturity profile shows significant obligations ahead.

Table 4: Debt Maturity Profile (as of December 31, 2023)

Period	Amount ($M)
Less than 1 Year	885
1-3 Years	2,445
3-5 Years	1,600
More than 5 Years	5,050
Total Outstanding Borrowings	9,980
Data Source: 16

Covenant Compliance and Financial Flexibility

To manage its financial position through the recent period of weak earnings, IFF amended its credit agreements in September 2023 to gain temporary relief from its primary financial covenant—a maximum net debt to credit adjusted EBITDA ratio.¹⁶ This relief provides crucial breathing room but comes with strict conditions, including restrictions on dividends and a prohibition on share repurchases. The amended covenant requires a gradual step-down of the maximum leverage ratio over time, from 5.25x through Q1 2024 down to 3.75x by the end of 2025.¹⁶ As of the end of Q1 2025, the company’s ratio was 3.9x, in compliance with the covenant but highlighting the narrow path management must navigate.⁶ The successful execution of divestitures, particularly the sale of Pharma Solutions, is critical to meeting these future step-downs.

Liquidity and Working Capital

IFF maintains adequate liquidity to fund its near-term operational needs. As of December 31, 2023, the company had $703 million in cash and cash equivalents and approximately $1.5 billion available under its $2.0 billion revolving credit facility.¹⁶ Management of working capital, especially inventory, has become a key focus. The aggressive inventory reduction program undertaken in 2023, while painful for margins due to lower production volumes, was a necessary step to unlock cash from the balance sheet and improve liquidity.¹⁵ Continued discipline in managing receivables, payables, and inventory will be essential for maximizing free cash flow generation to support debt reduction.

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