International Flavors Q2 Earnings Surpass Expectations Amid Year-Over-Year Sales Decline

IFF's Second Quarter 2025 Results and Market Performance

International Flavors & Fragrances Inc. (IFF) reported adjusted earnings of $1.15 per share for the second quarter of 2025, surpassing the Zacks Consensus Estimate of $1.11. However, this figure marked a slight decline of 1% compared to the same period in the previous year.

Including one-time items, the company recorded earnings of $2.38 per share, significantly higher than the $0.66 per share reported in the year-ago quarter. This indicates a strong performance when accounting for non-recurring events.

Sales and Revenue Analysis

Net sales for the June-end quarter reached $2.76 billion, a decrease of 4.3% year over year. Despite this drop, the figure exceeded the Zacks Consensus Estimate of $2.73 billion. When adjusted for currency fluctuations, sales grew by 3%, driven by mid-single digit improvements in the Taste and Health & Biosciences segments.

The cost of goods sold decreased by 4.8% year over year to $1.73 billion, but gross profit dipped slightly to $1.03 billion, representing a 3.6% decline from the prior-year period. The gross margin stood at 37.3%, compared to 37% in the previous year.

Research and development expenses increased by 5.2% to $182 million, while selling and administrative expenses declined by 2% to $483 million. Adjusted operating EBITDA fell to $552 million, a 6.1% decrease from the $588 million reported in the same quarter last year. The adjusted operating EBITDA margin was 20%, down from 20.4% in the previous year.

Segmental Performance Overview

At the start of the first quarter of 2025, IFF restructured its Nourish segment into the Taste and Food Ingredients segments.

In the Taste segment, net sales rose 4.6% year over year to $631 million, although this fell short of the estimated $663 million. Adjusted operating EBITDA for the segment was $125 million, an increase of 1.6% compared to the previous year. However, this was below the estimated $129 million.

The Food Ingredients segment saw a modest increase in net sales of 0.4% to $850 million, exceeding the estimate of $827 million. Adjusted operating EBITDA for the segment jumped 15.9% to $124 million, surpassing the expected $110 million.

In the Health & Biosciences segment, sales reached $577 million, up from $556 million in the year-ago quarter. Adjusted operating EBITDA for the segment was $151 million, reflecting a 1.3% increase. This was slightly below the projected $152.5 million.

The Scent segment experienced flat sales at $603 million, missing the forecast of $649 million. Adjusted operating EBITDA for the segment dropped by 7.8% to $130 million, falling short of the projected $135 million.

Pharma Solutions sales were $103 million, up 18.4% year over year. Adjusted operating EBITDA remained flat at $22 million.

In March 2024, IFF announced the sale of its Pharma Solutions business. On May 1, 2025, the company completed the divestiture of this unit to Roquette.

Financial Position and Cash Flow

At the end of the second quarter, IFF had $816 million in cash, cash equivalents, and restricted cash, a significant increase from the $469 million recorded at the end of 2024. Long-term debt decreased to $5.68 billion, down from $7.56 billion as of December 31, 2024.

Cash generated from operating activities in the first half of 2025 amounted to $368 million, compared to $336 million in the same period in the previous year.

Guidance and Future Outlook

IFF reaffirmed its 2025 guidance, projecting sales between $10.6 billion and $10.9 billion. Adjusted EBITDA is expected to range between $2 billion and $2.15 billion.

Stock Performance and Industry Comparison

Over the past year, IFF shares have declined by 25.4%, while the industry as a whole saw a marginal gain of 0.1%. The company currently holds a Zacks Rank of #2 (Buy), indicating a positive outlook for investors.

Other Chemical - Specialty Stocks in Q2

Linde plc (LIN) reported adjusted earnings of $4.09 per share for the second quarter of 2025, exceeding the Zacks Consensus Estimate of $4.03. Total revenues reached $8,495 million, surpassing the estimate of $8,353 million.

PPG Industries, Inc. (PPG) reported a profit of $450 million or $1.98 per share, a decline from $493 million or $2.09 per share in the previous year. Revenues for the quarter were $4,195 million, down 1% year over year but still above the Zacks Consensus Estimate of $4,131.6 million.

Ecolab Inc. (ECL) reported adjusted earnings of $1.89 per share, up from $1.68 a year ago. Net revenues reached $4.02 billion, beating the Zacks Consensus Estimate of $4.01 billion.