IFF (IFF) Q2 Revenue Tops Estimates

Key Points

• Earnings per share (excluding amortization, non-GAAP) reached $1.15, topping the $1.12 analyst estimate (non-GAAP).

• Revenue (GAAP) of $2.76 billion exceeded expectations, but fell 4.0% on a reported (GAAP) basis compared to the prior year.

• The company reaffirmed its fiscal 2025 guidance and continued capital improvements, including a $500 million share buyback authorized.

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International Flavors & Fragrances (NYSE:IFF), a global leader in specialty ingredients for food, beverages, personal care, and health markets, released its second-quarter 2025 results on August 5, 2025. The company reported revenue (GAAP) and non-GAAP EPS that topped Wall Street expectations: GAAP revenue came in at $2.76 billion versus the $2.70 billion estimate, and adjusted EPS (non-GAAP, excluding amortization) reached $1.15, slightly above the $1.12 consensus. Compared to the previous year, both revenue and adjusted operating EBITDA margins declined, yet productivity, capital allocation, and portfolio adjustments remain at the forefront. Management characterized the quarter as one of execution and improvement in key areas, but noted modest growth and pointed to challenges across several business segments.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Keys

International Flavors & Fragrances, commonly known as IFF, creates specialized compounds that are used in flavors, fragrances, food ingredients, enzymes, and probiotics. Its products are found in everything from soft drinks and yogurt to laundry detergent and perfumes. The company serves customers worldwide, with major segments including Taste (flavors and sweeteners), Scent (fragrance ingredients for personal and home care), Food Ingredients (compounds for food texture and preservation), and Health & Biosciences (enzymes and cultures for health and industrial use).

Recently, IFF has concentrated on sharpening its business focus. It invests heavily in research and development, with over 3,400 people working in innovation roles. Portfolio adjustments, such as divesting non-core businesses and restructuring segments, are key. Success depends on innovation, efficient supply chain management, global regulatory compliance, and managing a broad customer base across essential and discretionary products.

Quarterly Highlights and Underlying Trends

IFF reported GAAP revenue and non-GAAP earnings that both exceeded analyst projections. Adjusted EPS (excluding amortization) reached $1.15, compared to $1.16 in Q2 2024 and a $1.12 analyst forecast. Revenue (GAAP) declined to $2.76 billion, down from $2.89 billion in the prior year, but above the $2.70 billion estimate. Adjusted operating EBITDA (non-GAAP) was $552 million with a margin of 20.0%, indicating a drop from the prior year's 20.4%. Management attributed these shifts to divestitures, ongoing regulatory costs, and mild pressure on some product categories.

The Taste segment, responsible for supplying flavors and sweeteners to food and beverage makers, grew in reported (GAAP) sales by 3%, supported by increases in both pricing and sales volume. However, the reported segment margin declined. The Scent segment, which includes fragrance ingredients for personal care and household brands, experienced flat sales but saw a drop in margin due primarily to unfavorable net pricing. Health & Biosciences continued to provide high margins but saw tighter profitability compared to the prior year. Food Ingredients, which makes texture and preservation solutions for food, held flat in sales but expanded its adjusted operating EBITDA margin significantly from 12.9% to 14.6%.

Notably, IFF completed the divestiture of its Pharma Solutions business on May 1, 2025; Pharma Solutions contributed to results for the month of April. In addition to this substantial change, the company incurred ongoing regulatory and legal costs that amounted to $53 million, tied mainly to global fragrance industry investigations. These expenses weighed on net income and drew focus to compliance and litigation as persistent headwinds.

The company continued to execute its business realignment strategy by selling its Nitrocellulose business and agreeing to divest its soy crush, concentrates, and lecithin operations. The intent is to further simplify operations and dedicate resources to higher-value segments. This focus on capital structure improvement included launching a $500 million share buyback program, while deleveraging sharply reduced net debt to 2.5 times adjusted EBITDA (non-GAAP) from over 3.9 times in Q1 2025.

IFF made clear advances in key R&D areas, increasing research and development spending by 5% to $182 million (GAAP). Management emphasized the importance of innovation, particularly to support long-term growth for product pipelines in Taste, Scent, and Health & Biosciences.

Looking Ahead: Guidance and Near-Term Focus

Management reaffirmed its outlook for FY2025. Sales are forecast between $10.6 billion and $10.9 billion, and adjusted operating EBITDA (non-GAAP) is expected in the range of $2.00 billion to $2.15 billion. Guiding for full year 2025 comparable currency-neutral sales growth of 1% to 4% and comparable currency-neutral adjusted operating EBITDA growth of 5% to 10%, the company expects foreign exchange rates to reduce sales by about 1%, and divestitures to reduce sales growth by about 7%. The same divestitures are predicted to have an approximately 8% impact on adjusted operating EBITDA. Leadership also signaled expectations for tempered growth in the second half of FY2025, citing slowing consumer and customer demand in certain geographies and categories.

Investors should monitor a few developing trends in future quarters. These include the direction of margins in Taste and Scent, where pricing and competitive pressure may persist. IFF's progress keeping inventory and receivables in check will signal how well the company is matching supply to demand, especially as working capital increased in the period. Ongoing regulatory and legal costs, as well as the ability to integrate realigned and divested businesses, are also central. The freshly authorized share buyback and stronger balance sheet position provide extra flexibility.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends the following options: short August 2025 $82.50 calls on International Flavors & Fragrances. The Motley Fool has a disclosure policy.