IFF · Q2 2026 Earnings

Cautious

International Flavors & Fragrances

Reported August 4, 2026

30-second summary

The Q2 print is a discontinuity, not a comp: IFF announced a definitive agreement to sell its Food Ingredients disposal group to CVC Capital Partners (expected to close by end of Q2 2027) and rebased FY26 guidance to continuing operations only — FY revenue now $7.4–7.6B (vs. prior $10.5–10.8B) and adjusted EBITDA $1.53–1.60B (vs. prior $2.05–2.15B), reductions of ~30% and ~26% at the midpoint. Alongside, the Board authorized an enhanced $2.5B share repurchase program — beginning with a $500M ASR in H2 2026, with the remaining $2.0B to follow the transaction close (targeted completion by end of 2027); IFF expects ~$3.8B net cash proceeds from the CVC deal, with over $1B earmarked for debt reduction and a 2.0x–2.5x net debt / EBITDA target leverage range. Underlying performance was consistent with the "engineered shape" management telegraphed on the Q1 call: comparable currency-neutral sales grew 6% and CN adjusted EBITDA grew 6%, with segment margins holding (Taste 18.0%, H&B 25.0%, Scent 20.2%, group 20.9%). The comparable CN growth ranges were narrowed at the low end (sales to 2–4% from 1–4%; EBITDA to 4–8% from 3–8%), signaling incrementally better confidence in the organic profile even as the absolute-dollar guide collapses.

Headline numbers

EPS

Q2 FY2026

$0.82

-26.8% vs est.

Revenue

Q2 FY2026

$1.95B

+2.0% YoY

-27.4% vs est.

Gross margin

Q2 FY2026

43.6%

Operating margin

Q2 FY2026

8.1%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$1.95B	$2.76B	-29.3%	$2.74B	-28.7%
EPS	$0.82	$1.15	-28.7%	$1.25	-34.4%
Gross margin	43.6%	37.3%	+630bps	37.1%	+650bps
Operating margin	8.1%	7.2%	+90bps	10.0%	-186bps

Guidance

Company significantly lowered FY2026 guidance reflecting the separation of Frutarom, with FY revenue cut ~30% to $7.4B–$7.6B and EBITDA cut ~26% to $1.53B–$1.60B, but maintained comparable currency-neutral organic growth expectations at 2–4% sales and 4–8% EBITDA.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY 2026	$10.5 billion to $10.8 billion	$7.4 billion to $7.6 billion	-$3.1B to -$3.4B (midpoint: -$3.25B, or -30% lower)	Lowered
Adjusted Operating EBITDA	FY 2026	$2.05 billion to $2.15 billion	$1.53 billion to $1.60 billion	-$0.52B to -$0.55B (midpoint: -$0.535B, or -26% lower)	Lowered
Foreign Exchange Impact on Adjusted Operating EBITDA Growth	FY 2026	No impact	Approximately 2% positive	+2% improvement (from neutral to +2%)	Lowered
Divestitures Impact	FY 2026	Approximately 5% adverse impact on both sales and adjusted operating EBITDA growth	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Comparable Currency Neutral Sales Growth (2% to 4%), Comparable Currency Neutral Adjusted Operating EBITDA Growth (4% to 8%), Foreign Exchange Impact on Sales Growth (Approximately 1% positive)

Segment KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Taste	$0.688B	$0.631B	+9.0%
Health & Biosciences	$0.601B	$0.577B	+4.2%
Scent	$0.665B	$0.603B	+10.3%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Adjusted Operating EBITDA Margin (Continuing Operations)	20.9%	—	—
Taste Segment Adjusted Operating EBITDA Margin	18.0%	—	—
Health & Biosciences Segment Adjusted Operating EBITDA Margin	25.0%	—	—
Scent Segment Adjusted Operating EBITDA Margin	20.2%	—	—
Currency Neutral Sales Growth (Comparable)	6%	3%	—
Currency Neutral Adjusted Operating EBITDA Growth (Comparable)	6%	6%	—
Net Debt to Credit Adjusted EBITDA	2.5x	2.5x	—

Management tone

Q4 FY25 portfolio optimization → Q1 FY26 reaffirmation engineered by Q1 beat with Q2 pre-cut → Q2 FY26 structural rebase to continuing operations, comparable growth ranges narrowed upward, and a defined capital-return framework announced.

The Food Ingredients divestiture — flagged through 2025 as "under review" — has moved from optionality to signed agreement, with net proceeds of ~$3.8B expected and close targeted by end of Q2 2027. The press-release anchor: "the new presentation provides greater visibility into the growth and margin profile of our go-forward portfolio." Three quarters ago this was "no pressure to sell." Two quarters ago it was "the business has a strong operating plan." This quarter the agreement is signed — and the go-forward business is smaller, higher-margin (implied FY EBITDA margin ~20.9% vs. FY25's 19.2%), and structurally simpler. The pivot from optionality language to execution language is the most consequential tone shift in the sequence.

Stranded-cost remediation has emerged as a concrete cost-out lever the prior briefs did not surface. Management quantified ~$100M of stranded costs and stated a "remediation plan in place to eliminate approximately two thirds of stranded costs within the first year following transaction close," with substantially all removed within two years. This is the first quantified productivity commitment tied to the divestiture — and it is meaningful because it defines how quickly the continuing-operations margin structure normalizes. The FY26 EBITDA range implicitly bakes in a portion of this; the pace of stranded-cost elimination is now a discrete metric to track.

The comparable-growth narrative has tightened rather than softened, despite the disruption of the transaction. Both CN sales and CN EBITDA growth ranges moved the low end up by 100bps — the first low-end walk-up in the prior-brief sequence, and a departure from the 2025 pattern of reaffirming-while-walking-to-the-low-end. The signal: the operating business under the divestiture noise is performing at or above the middle of the prior range, which is what "underlying performance...consistent with previous guidance" is meant to convey.

The Food Ingredients / Frutarom binary catalyst that dominated Q3 FY25 through Q1 FY26 briefs has now moved from open to signed — the resolution is a sale to CVC, not a spin or a hold, and the capital-allocation framework (>$1B debt paydown, $2.5B buyback, 2.0x–2.5x leverage) is defined. Regulatory approval and close by end of Q2 2027 remain the gating items.

Answers to last quarter's watch list

Q2 FY26 absolute EBITDA vs. the $568M Q1 print — On a like-for-like basis (inclusive of discontinued ops), Q2 total adjusted EBITDA was $548M vs. Q1's $568M — a modest sequential decline consistent with management's Q1 framing of "lower than $568M" driven by fine fragrance softness and mix. Continuing-operations Q2 adjusted EBITDA was $408M. Status: Resolved

Middle East fine fragrance — duration of the disruption — Confirmed present but contained. Fine Fragrance grew only low-single digits due to the Middle East conflict, but Scent as a whole delivered +8% CN sales on strength in Fragrance Ingredients and Consumer Fragrance. The disruption did not derail the segment. Status: Resolved (contained)

Pricing surcharge realization in H2 — No specific pricing commentary in the press release beyond "favorable net pricing" in Taste; group EBITDA margin at 20.9% is roughly consistent with the FY implied ~21%, suggesting the H2 recovery thesis remains on track but is not yet visible in the Q2 print.

Continue monitoring

Food Ingredients / Frutarom sale process — Signed. Definitive agreement announced May 29, 2026 with CVC Capital Partners; ~$3.8B net cash proceeds; close expected end of Q2 2027; IFF retains ~10% minority interest. The binary catalyst has been resolved in direction, with regulatory close still pending. Status: Resolved (signed; pending close)

H&B trajectory on a consistent basis — H&B grew +5% CN sales in Q2, matching Q1's +5%. The trajectory is holding; the H2 2026 inflection thesis remains intact but has not yet accelerated.

Continue monitoring

FY26 FCF run-rate — H1 2026 FCF totaled $378M, up $284M YoY on a combined continuing + discontinued basis; management has still not reinstated a specific full-year FCF dollar target. Status: Partially resolved (H1 disclosed; FY target not reinstated)

What to watch into next quarter

Q3 FY26 comparable CN sales growth vs. the +6% Q2 print — Q2 landed above the FY 2–4% range; watch whether Q3 sustains above 4%. A step-down back into the 2–3% zone would suggest Q2's outperformance was one-quarter and management's decision to narrow only the low end (rather than raise the top) was appropriately cautious.

Stranded-cost remediation pace — management committed to eliminating approximately two-thirds of ~$100M of stranded costs within one year of close; watch for a quantified update on dollar-progress on the Q3 print. This is the discrete cost-out lever underneath the FY EBITDA range.

Scent Q3 CN EBITDA vs. CN sales gap — Q2 Scent CN sales grew +8% but CN EBITDA only +5%, with a -7% FX headwind on segment EBITDA. Watch whether the FX drag persists into Q3 and whether Fine Fragrance recovers as the Middle East disruption fades. A convergence between Scent's sales and EBITDA growth rates would confirm structural strength.

Full-year FCF disclosure — H1 FCF of $378M is disclosed on a combined basis; watch whether Q3 reintroduces a full-year continuing-operations FCF dollar target now that the disposal-group perimeter is defined.

Whether the FY comparable CN sales range narrows further — the low end walked up 100bps this quarter. A further narrowing (e.g., 3–4%) on the Q3 call would signal management is derisking the year on organic performance, not just structure.

H&B second-half acceleration — management has framed H&B as inflecting in H2 2026. Two consecutive +5% CN quarters (Q1, Q2) is stable, not accelerating. Q3 needs a print above +5% to keep the inflection thesis credible.

$500M ASR execution and timing — the ASR is expected in H2 2026; watch for size, cadence and share-count impact on the Q3 print.

Sources

IFF Q2 FY2026 Press Release — https://www.sec.gov/Archives/edgar/data/51253/000005125326000028/q22026991pressreleaseofiff.htm

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