International Flavors & Fragrances Inc. (IFF) Earnings Call Transcript & Summary

Ladies and gentlemen, please find your seats and silence your cell phones. The program will begin in 5 minutes.

Okay. Good afternoon, everyone. Thank you for joining us. Welcome to our 2022 Investor Day. It's great to see everybody in person and those that are joining the webcast, thank you. Thank you for joining. For those who don't know me, my name is Michael DeVeau, and I lead Investor Relations here at IFF. Very excited to spend the time today with the entire executive committee team to really go through the refresh strategy and the transformation of IFF into the next chapter. If it's okay, I'd like to start on the cautionary statement. So please take a moment and review our cautionary statement. Everything that we're going to say today is based on how we see things today, and contain elements of uncertainty. For the full risk factors, please look at our press release that we released this morning. In addition, we're going to use non-GAAP financial numbers. For those who like, you can please look at our website as well. You'll see our non-GAAP to GAAP reconciliation from a reference point. Very quickly, just to hit the agenda, we have a pretty packed afternoon. The first half of the day, we're going to spend going through formal presentations. We're going to start with Vision & Strategy from our CEO, Frank Clyburn. Then we're going to go into a little bit of R&D and innovation from Greg Yep, up who leads that. We'll take a little bit of a break. We'll come back on stage. Glenn will give a financial perspective, and then we'll invite the entire executive committee up to take a formal Q&A session. After that is complete, we will then go downstairs and we have innovation experiences, really showcasing some of the best of IFF. So please, I encourage you if you can join that would be fantastic. With that, I'd like to now formally introduce Franklin Clyburn, our CEO.

Well, good afternoon, everybody, and thank you for joining. And before I get started, I did want to just echo how excited I am to be here for my first investor opportunity and presentation for IFF. And we're really excited to share our future strategy and vision. Before we get started, though, I wanted to introduce, if I could, our executive team. Now they're all over here to my left, and I'm just going to go real quickly. Ana Paula, you could stand up and just say high. Deb Borg, Deb is our Head of HR. You've already met Mike, Mike, you want to stand up again. Ralf Finzel, Ralf, there is Ralf, heads up our operations group. Simon, I see Simon over there. Simon is our Head of H&B. Jen, I see Jen, there you go. Jen's our General Counsel. I think many of you know Glenn Richter. Glenn, our CFO. Angie, I see Angie, oh, there she is. Angie heads up Pharma Solutions. Vic, I see Vic over there, from our Head of IT. Christophe, Head of Scent. And then Greg is going to be joining us here in a few minutes. He's our Head of Research and Development. So this is the executive team, and I am very happy today. On behalf of this team, on behalf of our Board to really talk about the future for IFF, both near term and then also how we aspire to be a leading innovative company with top-tier industry growth. We're going to take you through our growth-oriented strategy and really unpack that to let you know how we see driving top-tier industry growth, and what we're going to be really focused on as a team? Second, we're going to talk about our cost productivity initiatives and really unpack that for you today, and show you how we're making trade-offs across the organization. Third, and you saw announced, I've made the decision, in conjunction with our Board, to simplify our operating model as well as for us to go much more focused towards end market customers, and we'll walk you through that. In addition to that, we are targeting a strong financial profile. You'll hear us speak about our continued leadership in ESG. We are also announcing today that we're continuing to evolve our Board of Directors, and I'll share with you some additional information around that, strengthening our management talent, and then also, we will speak about how we're continuing to advance our portfolio. So if you start with the purpose of IFF, and honestly, this is the reason why I wanted to join this company. I wanted to join this company because of its purpose, its purpose of applying science and creativity for a better world. There's a reason why IFF exists. Our commitment is to do more good in the world. And this is something that we're rallying around as a company. And I think this is honestly what differentiates us. It also attracts some of the top talent in the industry. So I wanted to start today really from a position of how we see the company and our strengths because I think it's always important to really look at a company and say, what is our foundation? And we are starting from a position of strength. We are seen by our customers as a leading partner in our industry. We have a world-class research and development pipeline aligned to end market trends. We have 3,000 engineers and scientists, some of the best in the industry. We also have a highly diversified business that I'm going to talk to you about here in just a bit. And we also have a very expansive global network where we have a presence around the world. And in fact, 40% of our sales is in the emerging markets. Some of the Chevrons and quotes you see here on the slide, I can tell you that I've had a chance to engage with many customers since I joined in February. And the 2 things that customers have provided me feedback on, especially from where our strengths are; one, they really can count on IFF. They love our capabilities. They love the fact that we have such a broad strong portfolio; two, they've mentioned to me, they also like to learn more about our R&D capabilities and how we can co-create and create greater future opportunities for their customers. So that's 1 of the positives that we have as a company, clearly, a strong foundation. We also, as a company, have the largest research and development spend in the industry. This is a key part of our strategy. Our focus is to continue to make sure we're bringing differentiated solutions to our customers. This is one of the key underpinnings for our strategy, and we'll talk a lot about that here today. I'll share with you some thoughts as well as Greg is going to really talk to you about our innovation portfolio and pipeline. We also have a very strong, as you can see, expansive talent team here. And then also you can clearly see our research and creative application centers are very broad around the world. This allows us to innovate with our global customers, but also with many regional and local customers. Here is the network. So as you can see here on this slide, you see a very strong presence with regards to our labs, plants and some of our innovation sites. You can also see how our sales line up around the world. North America represents approximately 30% of our sales. Europe, Africa and Middle East, approximately 35% of our sales. You can see Latin America at 11%, and you can see where Asia Pacific is approximately 24%. This is great from an overall diversity perspective great from a customer perspective. I am going to come back to you, though, as one of our key underpinnings of our growth-oriented strategy is to expand our business in the emerging markets. We see this as a significant opportunity for us going forward. So I'll come back to that in just a few minutes. We also are seen as a leader in ESG, and this is really important. Sustainability, and this is very important, not only for us, but for our customers and where the world is going. We have been validated across many multiple platforms by third parties as a leader. You can see some of our ratings, our rankings as well as we're seen as a strong partner in ESG. My message, though, is we're not resting on our laurels. We're going to continue to innovate, focus, improve in this area to make sure that we're doing everything we can to have a better IFF and have a better positive impact on the world. So we're starting from a position of strength, a lot of great things about the company. So when I came in, I wanted to do a couple of things. One, we really wanted to understand how are we going to build a sustainable growth strategy for our company. And it's in 3 phases. First, this year, we've been focusing on doing a diagnostic as well as then thinking about the actions that we could put in place urgency to drive stronger performance. Second, we wanted to navigate and accelerate as we head into '23. We all know there are going to be headwinds in '23. We're going to navigate some of those headwinds, especially in the near term, and we're looking to accelerate our performance as we go forward, and we'll talk more about that here in a bit. '24 and beyond is when IFF is focused on aspiring and achieving, and we are shooting for a very strong financial performance as a company as you move into '24 through the '26 time frame. So let's take a look at the strategic assessment. We wanted to take an approach that first started with a very detailed financial assessment, and I've spoken to you in the past about using our return on invested capital framework. We also looked at market attractiveness, and I'll share with you some of the findings from that now in here in just a few minutes. We also wanted to have, and I spent a lot of time, I said I really want to hear from customers. I wanted to spend time one-on-one with customers. I met with many of our CEO customers, many of our heads of R&D customers. And I've gotten some really important feedback on how IFF is seen today, but also areas where we need to improve. And I'm going to share with you that here in a few minutes. We did a deep dive into our research and development pipeline and portfolio. We've done 2 quarterly pipeline reviews. This is now a part of our DNA, where we're making sure as an entire senior team our commercial organization, R&D organizations are coming together to look at our most promising innovations, and how do we bring that to market faster as well as make sure those innovations are really connected to the end markets. We also spent some time, and we announced today, and I'll go through some accelerated productivity program. We did a deep look at our cost structure as a company. We benchmark within our industry and in other industries, and we have an opportunity to improve our cost structure, and we'll share with you a little bit more here today. In addition, I have spent time with 150 of our senior leaders around the world. This gave me an opportunity to really understand, most importantly, our talent as well as our culture as a company, and how does IFF operate? And I'll speak to you some of the findings as well as where we're focusing futurely around culture. And then lastly, I've had a chance to engage with many of our owners, many of the analysts, asking you feedback about IFF. And what I can tell you after the strategic assessment, we are focusing on making sure IFF is very well positioned for the future to drive long-term profitable growth as we go forward. So let's talk about the portfolio. We have had the opportunity to share with many of you sort of the framework that we've used around ROIC. We want to spend some time today more unpacking some of that framework to show you the specifics of where many of our product lines actually map from an ROIC perspective. There's some great news here. 55% of our revenues are in the high return on invested capital bucket, 55%. 25% are in very strong, attractive ROIC categories. So you think about it, 80% of our business we see as very attractive from an ROIC perspective and market attractiveness, which is a great place to start. We also see 20% of our revenues are in the underperformed or optimized bucket, and I'll share with you here some of the actions we're doing around that. If we look at specifics, and how some of our products map, you clearly can see a number of our key franchise and portfolio map in the Invest & Winners, Consumer Ingredients, Fine Fragrances, Cultures & Food, enzymes, Food Design, Excluding Savory Solutions. I want to give you 2 examples of how we're thinking about the invest in winter category. Flavors, high ROIC opportunity and business for us. The Flavors market in total is estimated to be about $16 billion, growing approximately 3%. Within that, the beverage category is approximately $6 billion. We have an underpenetrated market opportunity in beverages. Our share is about 12%. We're going to invest in those areas that are high ROIC areas to fuel the growth, and we're counting on, for instance, in that example, Flavors to drive growth above the market. I'll use health as another example. We've had a chance to talk about some of the challenges in the probiotic North American marketplace today. As we look out over the next several years, we still believe that's a very strong market, not only in the U.S. but outside the U.S. It's about a $4 billion market. We have a significant share opportunity in that marketplace, very attractive from an ROIC perspective. So we've really had a chance to delve in, and I'm just using those 2 examples to look at our portfolio. You can see in the Maximize The Core, you can see some very good businesses in that core. And we're going to continue to look at how we drive selectively growth in that Maximize The Core segment of our business. But there are underperformers, and you can see them listed here on the slide, and we will continually look at these products and portfolio to do 2 things. One, we have to figure out ways to improve our performance, or these will be parts of our portfolio that we will look to divest over time if we cannot optimize or improve. Here's how we're now taking this into the company, and most importantly, with this analysis is how do you operationalize this across 24,000 people? We have now established our playbook, where, in the invest category, you clearly can see that we are going to provide disproportionate investment to those attractive categories, high ROIC. And as a part of our growth algorithm, we're expecting to grow above the market, in fact, 2x the market rate in those categories. We are making very selective choices in our portfolio. In the maximized category, you can see here the 25%, we think we'll likely grow at the market, okay? And this is a good return for us -- we'll be selective in how we allocate resources. We'll look at mix enrichment as an example, but really good businesses there. And then you can see in the optimize, we're going to ask our management team to really look at ways to improve the business, maybe through some SKU rationalization, how we engage with certain customers or we will look at them as noncore and look for divestitures. So this becomes the framework for us strategically as a company. And this playbook then leads us to say, okay, how as a company now going to focus its efforts to really do what matters most in the world, which is our rallying cry for IFF, but we now have come down to 3 things as a company that I want you to think about and focus on. One, be, 2, build and 3, become. Our journey is, one, to become the premier partner for our customers in the world. That's the objective. We're going to have a laser focus on building strong customer intimacy as a company. Two, building our future making sure we're very disciplined, driving profitable growth, reinvesting where we're getting good returns, expanding our margin profile, but we need to build the future of this company. And we're going to talk about that here in a few minutes. And then, three, I've spoken a lot about become one IFF. We have had a lot of mergers, integrations in the company. It is now all coming together under one IFF. So be, build, become, and everything that we are doing is also ESG is embedded in all of our activities. So how do we think about unlocking incremental value, and I think it's important, and you saw in our press release today that our aspiration is to grow the top line in the range -- in '24, '25 and '26 in the 4% to 6% range. Think about today, on average, over the last couple of years, that's been in the range of 2% to 3%. How are we going to make that step up in our growth trajectory? And we have done a very detailed assessment and looked at the levers that we feel confident we'll be able to execute against and drive growth. One, we've had pain points in this company around our supply chain, and I'm not going to duck from that. We need to improve aspects of our supply chain, and we're making good progress, still work to be done, and I'll unpack that a little bit more. And we've gotten feedback from many of our customers that we have work to do there. #2, we are laser-focused on enhancing our commercial capabilities and commercial execution. And you'll see some of our plans around that. Three, I'll talk specifically about geographic expansion and the opportunity that we have, and this is one that I'm very excited about, and we've done a lot of work with our teams, in particular, in Singapore and in Asia. Four, Greg will talk a lot about our innovation platform. And these 4 things, we believe, are the foundation in building blocks for our growth agenda to drive good top line sales performance, and we'll unpack those. #5, we have to, as a company, we have high aspirations. We want to have ambition, but we know we've got to make trade-offs. And you'll hear us talk about our productivity agenda, and we've got specific actions that have been identified. In addition, you can see somewhat -- it's hard to maybe say, it's not shaded on the slide. These are the strategic enablers for our growth agenda and our productivity agenda. We're moving to a new operating model. We've made a decision that the operating model we need needs to shift to be able to realize our aspiration and ambition. Two, we also are focusing on strengthening our talent and having the right culture, and we'll talk about that. And then lastly, we're going to make an investment in making sure that we have strong digital capabilities as a company end-to-end that impact the entire organization. We believe this will help us both in the near term and long term. So as you go forward and think about, okay, here's first thing, supply, and how do we do this? Our customers are looking for 95% on-time order fulfillment. In some parts of our portfolio, we're moving up to that direction. In other parts, we're probably in the low 80s. We have introduced a new operating system called O Flow to approximately 135 of our plants, and we're seeing really good order fulfillment improvement. And I feel very confident that we will get there very quickly on behalf of what our customers are expecting. Service levels are going to be really important to us as we think about our growth going forward, and we have left some business on the table. So that's something that we're going to focus on. We're going to drive automation and centralization. And then we're also going to make sure that we have good processes in place to be able to meet those service levels, but also make sure that our inventory is in the right place at the right level. We need to also improve net working capital and cash flow, and we'll talk more about that as well. But this is clearly going to be important for us. We're also making sure that we are selectively targeting, adding capacity in our key businesses. You can see, in 2022, CapEx represented approximately 4% of our sales. That's what we're estimating. '23 will be in a similar range. However, as we move into the '24 to '26 time frame, we're going to invest a little bit more as a percent of sales in key targeted areas that are high-margin, high-growth opportunities for us. You can see some examples and enzymes, probiotics, cultures and pharma. This is where we'll be adding additional CapEx based on the demand we see, good, high-margin return businesses. In addition to that, we also we'll be spending, over 5 years, $300 million, and I'll talk more about that in building out our enterprise resource planning system so that we have the technology, digital capabilities to win in the marketplace and to build a more efficient company. So this is also a key as far as adding capacity in a very targeted manner in high-margin, high-return business opportunities. Commercial success, we are going to want to really transform IFF to be a very customer-centric, strong premier partner as we move forward. We are going to invest to make sure that our customer teams have everything that they need from a tool perspective as well as we are aligning our incentives to do a couple of different things as we go into '23. One, if you're looking for a single ingredient and enzyme for IFF, and you're not interested in the broader opportunities to co-create or integrated solutions, we've got to make sure we can win with the customer there. Our incentive system will align to that. But we also need to be able to realize the full potential of this company and being able to bring the breadth of our portfolio to this company. And we need to change our incentives and adjust those. That's something that we're putting in place. We're going to have very strong key performance indicators. We also are going to be establishing a center of excellence to help us with our customers, in particular, some of our global key customers that have mentioned to us, we really enjoy working with IFF, but we want faster responses from you. We really want to better understand the entire portfolio that you bring. So we're going to really look at our account management team and practices and how we show up to our key customers. We also want for our company to be the company our customers turn to for great industry-leading market insights, and that's something that also our commercial teams will be focusing in on. The KPIs are clear. We're going to look at our pipeline flow of new opportunities, our win rates. Clearly, we're going to be looking at customer acquisition, new customers, retention of customers as well as how do our customers view us from a Net Promoter Score. So that's going to be a key part of how we continue to build towards a higher-growing company. Revenue synergies is something that I know we've been discussing at IFF now for a while. And many of you have asked me, what are the thoughts around revenue synergies? So I wanted to make sure I did a couple of things here. One, we do believe that these are achievable objectives. And in fact, I've had a chance to work with our team across all 3 -- all 4 of our divisions to really look at what is the opportunity, and we are committing in our overall growth profile. So it's in our profile, $400 million in revenue synergies in the year of 2026. We are behind where we originally mentioned that we would be. That was due to COVID, supply chain issues, some capacity challenges. We do believe this is achievable when we look at our portfolio, but more importantly, when we engage and look at the opportunities with our customers. Many of the opportunities are within our Nourish division, in particular, in dairy, in culinary. We see in bakery, really good opportunities. But we also see opportunities between our H&B division and Scent. Nourish in H&B is we've mapped this out and looked at the customer opportunity, this is going to be really important. We're also building accountability and strengthening our revenue synergy opportunity, simplifying our processes, making sure we have a strong drive to action as well as, I've mentioned, we're going to be redesigning our incentive program to capture the opportunity. Emerging markets. So if you think about as we build towards this growth profile and accelerating, we've done a deep dive into the emerging markets. On the slide, you can see here, our sales are approximately 40% in these markets, Greater Asia, Africa, Latin America. The growth rates are projected growth rates over the next several years. And you can see the market overall or this business in the market is expected to be about 3%. In the emerging markets, it's projected to be double, 5% to 6%. And in fact, we're seeing that this year. While we have a really expansive network and penetration in many of these markets, we're under-indexed. We've had a chance to look at that. Where the market may be growing 5%, we may be growing 2% or 3%, similar to what we're doing in the developed markets. We are going to make the decision to add sales personnel, scientists. We're going to add some resources into the emerging markets in a very targeted way to capture the opportunities we see here. Now we have to do this in a targeted way because, clearly, you have global competitors, local competitors. And we've looked at the opportunities, and I'll give you a couple of examples here where we're under indexed, and we've been very focused. We now have a new creative center that we just opened up in Singapore. It houses all of IFF's innovation. We had a number of customers from Asia come to that creative center, and they were extremely excited about the capabilities that they saw there. We think that is going to help us drive growth in Asia. We also have commercial development programs that have been identified in some of the markets that you see here on the slide, in particular, in China, Korea and India. We also see good opportunities in the Middle East and Africa for our flavors expansion, and there's really good opportunities there that have been identified. And then in Latin America, there's a lot of interest from a health and gut health perspective. And we see that as a good opportunity for us in addition to opportunities in Mexico around flavors. So we've had a chance to look at the emerging markets, clearly be laser-focused on our plans, and this is also a part of our growth agenda going forward. So we have really identified the levers that we think are really important. And then underpinning that, and surrounding all of that is innovation. And we are also placing a bet as a company that we will be able to differentiate our solutions based on our strong R&D platforms. And Greg is going to go into that here in a few minutes. We're going to expand our biotech capabilities. This is an area that we think we are differentiating and have huge capabilities to go from pilot scale all the way up to commercialization. Not many companies can do that. We also believe that when you hear about our polysaccharide program and our microbiome program, Greg is going to share that these are truly differentiated programs for our customers, and we think this will help drive growth in the future. We're also making sure that we look at our pipeline, and we have identified the top 50 programs that we think are going to be the most important near-term programs to meet customer needs, and we're looking at other ways to fuel or accelerate some of those projects and programs to get them to market quicker. So this is going to be key for us as well as we think about our growth agenda. And then digital tools and analytics, and we'll talk a little bit more about that here in a minute, is really going to be key to enable our overall R&D efforts. I also want you to know there's a lot of rigor that we're putting into making sure that our R&D teams are locked at the hip commercial teams to make sure that as we go from discovery or to molecular design as we're thinking about R&D, it's always tightly linked to the customer into the commercial opportunity. And we're building that into our company as well. And we've got work to do there, but I feel really good on our progress. So as you think about the first 4 opportunities, that was really to drive and fuel our growth agenda. In addition to that, because of our ambition, we also know we have to target significant savings and make trade-offs in the company, to do 2 things: one, to reinvest where we have good growth opportunities, but, two, to improve profitability and expand margins. You've seen some of -- parts of this slide as we've shown you throughout the year, and we'll spend some time here. I'll spend a little bit of time here right now around the program and then Glenn is going to unpack it even more. I want you to think of that we are focused really in a couple of areas. The first big bar is really within our operations group. We're focusing on end-to-end productivity, how do we drive improved costs manufacturing project, processes, digitalization. So end-to-end processes led by Ralf Finzel and the operation team is a key part of our productivity agenda to improve our cost of goods and improve our overall gross margin profile. In addition to that, we are focused on our supply chain. We're also looking at our procurement activities, and we have brought in a new Head of Procurement into the organization. We also are looking at demand management and indirect spend. We have opportunities to reduce our spend, especially when we look at outside services, and we're going to have a laser focus there. And then we've also communicated in the past what we're doing from a global shared services, building centers of excellence for some of our key functions to help be more effective, but also to do business and transactions in a much more efficient way. So those are some of the major productivity initiatives. But in addition to that, we also looked at our cost base from an administrative perspective. And we think there's an opportunity to accelerate and reduce our costs in our G&A line. And when you combine those, we had previously communicated a net savings of $250 million to $300 million over the '23, '24, '25 time frame. We are now increasing that to a range of $350 million to $400 million, and that is because we are bringing forward additional cost reductions on the admin expense line. Our goal is to deliver $100 million in run rate savings. We're focused on achieving the best in class and industry admin expense profile. We are going to do it in a very tailored way though, and this is really important. Because for us, the greatest lever and greatest value-creating opportunity we have is driving growth. But we believe that we can do that by ring-fencing our commercial customer-facing organization, R&D organization, application groups. We're going to be very targeted of how we reduce this cost. But I firmly believe we can make it happen as we go through '23, get on a run rate of $100 million, and I firmly believe that this is actually going to help us to increase our speed and agility and decision-making as a company. And you can see some of the actions that we have here on the slide. So if you think about revenue-generating activities, our productivity agenda, we then said, what does the operating model need to look like for the future of this company to support the growth agenda? We believe that our goal really has to be with the largest -- one of the largest portfolios in the company, broad platforms. We have to figure out a way to maximize the full potential of our business. And when we looked at this, we felt it was time to move much more to an end market alignment like many of our customers are aligned. And also, we believe this will bring stronger customer centricity and engagement with our customers going forward. We need to strengthen our customer engagement, as I mentioned. There's opportunities to do that, and we're focusing on that, in particular, with our key accounts. But doing this, we're going to do this over 2023. We will minimize disruption as we go through this, so the customer will not see or experiencing this, as well as we'll maintain our technical capabilities. And then we will have our Commercial Excellence team, making sure we're building the capabilities to help support our business units going forward. Here's graphically the From Two. As I mentioned, today, we're staying in our divisional construct as of today. We are working on moving to the new operating model. We'll be updating you as we go through 2023. But we believe that this end market state gives us a greater opportunity to win and look at the business from a category perspective as our customers look at the business. They're thinking about what's going to be required and what do cost consumers want in food and beverage? And we're going to align our business as well as our R&D and everyone to that end market state. Household & Personal Care, we think also is really important categories, and we want to be experts in those categories and thinking about how we co-create with our customers and our partners and then also health. So more to come on this, but we are making the shift from the 4 divisional structure we're in today to the 3 business units of the future. And we really believe this is going to help us better interact and engage with our customers going forward. Commercial excellence is also going to be a group that we are going to elevate in the company. So this is an area that is a part of our company today. I'm elevating this to an executive position to really help with a couple of things. We need to build stronger sales capabilities. We need to be a leader in pricing analytics around the world with our customers and how do we have best practice sharing. We need to also make sure that we're doing everything to drive new business opportunities. The end-to-end process of really helping us better understand revenue synergies is going to be key, and we need for a group to help us there as well as we have a very strong agenda working with our IT colleagues to build out analytical tools, capabilities for the future. And this is something that we believe is going to help differentiate us, really understanding our customers and having the technology and tools for our frontline organization. So this will be also an important enabler of our company and our growth agenda going forward. As I look at the operating model, and we think about how we're making that shift, we also know this has to be in one of the most important things I feel very strongly about as a company that you're only as successful as the culture you have and the talent and people you have in your company. And we are laser-focused on building a very strong culture in this company, anchored in 2 different areas: #1, to build a winning culture, I believe you have to be really clear and crisp on the objectives and what it is that you want people to really work on and focus. We've outlined now our ROIC framework, and we've talked about prioritization and that will help to drive both an external lens as well as how we make sure we're making good decisions in the company. But we also need to ensure that people understand the importance of collaborating and winning on behalf of the customer as well as we're going to have strong rigor and accountability and transparency in the company. And that's something that we have been focused on as a senior management team. We, in addition to that, think about we want all 24,000 IFFers to have a very strong value proposition. When you wake up in the morning, what is it that you do that contributes to doing more good in the world on behalf of our customers? So culture is something that we're spending a lot of time on, and we're making really good progress of building a winning culture. Our incentives are going to be aligned very clearly to our overall objectives. As I mentioned, we're going to change some of our commercial incentive plans, but we also have aligned, and I've communicated this, I think, in certain forms with our senior management team, 2 metrics for our long-term incentive program, return on invested capital and total shareholder return. We think that aligns to our owners and to our investors, and we think those are the 2 metrics we want to drive behavior going forward from an incentive perspective. And we think this allows us to drive a culture of excellence. So as we move forward, the last thing I just wanted to just come back and highlight is the importance of technology and the digital transformation of how that impacts the entire operation and organization. And we have a very talented IT team that is working on our digital transformation journey. We have made the decision to invest over 5 years, $300 million. It is going to enable our growth and productivity while enhancing our R&D efforts, our commercial efforts that we've spoken about. Operations is going to be key of how do we automate and bring tools and what we need in the plant for to drive greater productivity our finance organization with regards to reporting, and then also our HR teams and organization. So technology in this digital transformation, think of it as a key, key enabler for us to drive our growth and productivity agenda going forward. Lastly, portfolio optimization. We've also announced this morning that we are continuing to look at how do we unlock incremental shareholder value based off of our portfolio analysis. And we have previously announced that we have completed the divestitures of microbial control and fruit preparation. We have also announced today that we expect to announce 3 additional non-core divestitures by the end of the first quarter of 2023. Most importantly is we're going to continuously evaluate our portfolio, which really is going to be based on our strategic as well as financial lens to identify incremental opportunities to unlock shareholder value, and we are committed to taking the proceeds to de-lever our balance sheet below the 3x net debt to credit adjusted EBITDA objective that we have communicated in 2024. So how does this all shape up, and we announced this in our press release, our aspirations for growth in the '24 to '26 time frame. I do want to mention '23. As we know, there are a number of moving pieces in 2023 with regards to inflation and what we're seeing the volatility in energy, and we're looking at our volume currently. With that, our preliminary view on '23, we've highlighted is mid-single-digit profit growth for '23. Glen will spend a little bit more time on that here in just a few minutes. And then we will come back to you on our normal cadence in February to give you a specific guidance for '23, so we'll spend a little bit more time here today, but official guidance in '20 -- or for '23 in February. But when we look at a more normal marketing coming out of '23, we are committing to the following financial profile over the '24, '25, '26 time frame average growth rates. 4% to 6% top line growth from a currency-neutral sales perspective. We think this puts us really well positioned in the industry. And like I said, we've got to walk through those initiatives to be able to go from that 2% to 3% range today to 4% to 6%, and this is what we're really focused on based on the initiatives I mentioned. I've also communicated in the past, we want strong leverage in our P&L. We are committing to in that time frame of currency-neutral adjusted operating EBITDA growth of 8% to 10%. We also are going to have a laser focus on improving our adjusted free cash flow generation. And you can see here of greater than $1.5 billion annually, and I've already communicated, our net debt to credit adjusted EBITDA objective in 2024. Lastly, I don't want to lose sight with a lot of things going on in IFF, but we also are not going to lose sight of what we've committed to from an ESG plus perspective in 2030. Our focus and objectives around climate and planetary health, equity and well-being, transparency and accountability as well as sustainable solutions, these objectives are still in place, and this is very important, especially as we look at what's happening in Europe and where they're going as well as our customers are constantly asking us about this. So we are committed to continuing our leadership in ESG and our 2030 goals. Shifting gears to the last couple of points I would like to make is, in addition to the activity that I just highlighted, where we are laser-focused as a company, there's also been a lot of discussions with our Board of Directors. And today, on behalf of our Board of Directors, and as a member of the Board, I want to announce just a couple of things. One, our Board is committed to evolving in line with best-in-class governance standards. We intend to move from a Board size today of 14 to a target size of 10 as we head to the May '23 Annual Meeting. We also are looking at the skills needed for our Board and the composition of our Board to make sure that we have senior executives that have strong relevant skills and tools and business knowledges that are really going to help us at IFF. And with that, I am very pleased today to announce that we will be appointing Mark Costa. Mark is the Chairman and CEO of Eastman. Mark will be joining our Board of Directors in January of '23. And I know I've had a chance to interact with Mark several times as well as the rest of our Board and we're really looking forward to having Mark joining our Board in January. Key takeaways and hopefully in summary and this is I know been a lot of information coming out today, but, I want you to think about a couple of things and hopefully a couple of key takeaways from my perspective. One, we have a great business at IFF. Industry leading innovations and stong positions in many categories. Great place to start. We have also identified where we need to get better and improve and we have now identified a very clear strategy of how we're going to accelerate growth going forward. And I am very confident in that strategy and that growth plan. We're going to be very disciplined from a resource perspective. We will drive cost reductions, as been highlighted here today, to do two things, one, to make sure we can reinvest where we see good growth opportunities; and, two, to be able to expand our margins. The detailed operating plans are in place as a company. And now it is all about execution in IFF. I have really enjoyed my first 9 months in this company. It has a tremendous future, and I am very excited that each one of you have had a chance to come today. And hopefully, you're energized and excited about what you've heard here. But I also want to now shift things over to Dr. Greg Yep, who will be heading up and leading our Investor Day presentation from an R&D and innovation perspective. Thank you. And Greg, please, welcome to the stage. Appreciate it.

Thanks, Frank. Super excited to be up here to talk about IFF R&D., and our IFF innovation plans over the next couple of years. Something exciting happened in R&D over a year ago. We had the merger of 2 iconic R&D organizations. We had IFF R&D merged with DuPont Nutrition and Biosciences R&D. IFF R&D gave us the creativity, and the creativity of the flavors, perfumers, sent designers, scientists and engineers. DuPont Nutrition & Biosciences R&D gave us the core values in science in areas of chemistry, biology and material science. So really excited about that. But one thing it also led, it gave us the leadership capability in biotechnology. With the mergers of 2 organizations, we had a vision, and the vision was to unlock the power of science and creativity to deliver first-to-market sustainable solutions that transfer consumers' lives and expectations. And this is important because now we have a leadership position in all these categories, in Food & Beverage, in Health and in Home & Personal Care. As Frank mentioned earlier, it also gave us the largest spend in R&D in the industry, driving greater differentiation through the sustained R&D investment allows us to take a leadership position in the categories that I'll talk about later in this presentation. A couple of things are noted here. It allows us to, one, look at broader categories and go deep in these categories. It also allows us to go deeper in some of the challenges in the industry and turn these critical challenges into opportunities that we can win. It also allows us to scale. Scaling technology is important. It's important to do things in the lab, but if you can't scale it, it's not going to be good for a customer. So what it allows us to scale globally around the world, as you can see some of the efforts we're going to have there. Frank had a heat map of all the labs that we had around the world and these labs are strategically located next to an innovation site, but more importantly they're located next to our production sites. And this is for a reason so they can scale and execute that technology ongoing. But it also allows us to learn a lot from the customer and also deliver and execute from those briefs moving forward. I talked about the breadth of capability, but we believe this establishes a strong competitive position in the marketplace with our R&D organization. You can see from left to right we play in all these different categories. Not only do we play in these categories, we're leading these categories in these specific areas. And this is because of the investment we placed in the merger of 2 R&D organizations. If you look to the left in flavors, soy proteins and texturants, really gives us a leadership position in emulsifiers, modulation systems and inclusions. And in the middle, we have our health portfolio, really taking the lead in microbiome and leadership position in probiotics, home and personal care, animal nutrition and grain processing. And in our fragrance line, really taking the leadership position in consumer fragrances, fine fragrances and then fragrance ingredients and active cosmetics. And also in our pharma area, preparing for the future of pharma and delivery of drugs and excipients. So as you can see here, by far, not too many companies can say that they can play in these category positions, but also leading these category positions, as you see on this slide. And let me talk about the R&D. This is our world-class R&D toolkit. And this is how R&D is set up. And we believe we have the strongest innovation platform in the industry. The way we're set up as we're set up with R&D platforms and capabilities to actually fuel these platforms for the future. And why the platform is important because the platforms actually allow differentiation in technology into applications. Those applications pull the biggest brands that you see on the supermarket shelf today and in apartment stores today. So let me go over some of these platforms from left to right, one in delivery systems. Why are delivery systems important? One they allow us to deliver that flavor, fragrance or that active to that application. Do you ever wonder why you're clothes smells so fresh and going over the week, well, it's because of delivery systems. And did you ever wonder why that flavor substantially stays in that chewing gum, we call it gobstopper approach, it's because of delivery systems. And the way where that Active can stay in that gummy bear for so long, it's because of delivery systems. So really spending a lot of time in these specific areas, but actually take it into the next generation. What I tell you, we take those delivery systems and do non-micro-plastic delivery systems that are better actually for you and better for the environment. So spending a lot of time in those specific areas. And then in our health and wellness area, really looking and taking the leadership position in probiotics, but also in the microbiome. And why is microbiome important? Because it's a good bacterin your gut, but also in your skin. So taking a leadership position there, and also looking at probiotics and how it can help that microbiome on that great bacteria or there was microbes on your body to give your overall health and wellness. And then modulation, what's actually modulation? This is a fancy term to say lowering salt, fat and sugar and products and make them taste great. Did you ever wonder why we have such low-calorie foods right now in beverages and in snacks. It's because of modulation. We're also moving to an area called Scent modulation, and you'll see this downstairs, can actually send you more than actually help smell grade, can increase your cognition, kind of bring back memory, can it help you sleep. You'll see a demo downstairs that actually can help you sleep and hopefully, I don't make you sleep right now, but hopefully, you'll see that downstairs, and you'll be able to experience how Scent is such a powerful tool that we have. And then in taste ingredients, we've been a pioneer ingredients for so long in taste, scent and cosmetic actives. And when you think of these ingredients, this is the pallet that are flavors and our perfumers work to create the greatest iconic perfumes that you see in the market today, but also the flavors that you see in the biggest brands on the earth today. What happens if I say we're going to take these ingredients and generate a new pallet. So it's like new colors for an artist. We're really generating a new pallets biodegradable, renewable and regenerable. We think this is exciting, but we believe this is the future of actually how we're actually going to make our products. And then we look at functional food ingredients and preservation. What is actually doing there? It's the texture and the mouth feel. And actually, why do we need artificial preservatives? We really don't. And we're working to make those natural in a way that we can deliver that extensive shelf life on those products. But that's why our ice cream taste so great today because of the functional food cultures and probiotics and actives that we have in those food systems. And then let's look at bio-based actives, enzymes and polymers. Why these are so exciting, because we can use a biotechnology platform to actually generate cleaning enzymes and cleaning polymers. So that's why your dishes are so clean today. And that's why you can only -- you can clean your clothes in cold water in short time. It's because of these cleaning enzymes and polymers out there. And you'll have a demo downstairs that actually shows the differentiation of these polymers and how we actually tune them to actually the cleaning enzyme into the polymer for that application. And then our protein solutions. This is an exciting area for us, but it's not a new area for us. We have 30-plus years of experience in our [ early ] days in St. Louis to really drive differentiation and alternative proteins. And we can apply this knowledge with other alternative proteins out there. And you'll see demos downstairs to show the sensory attributes and flavor of these alternative proteins. So this is super, super exciting for us to go in these specific areas. And it's good to talk about platforms, what about our enabling capabilities? You really can't have these platforms without enabling capabilities behind that. And that's from the 3,000 scientists, engineers and developers that we have that I'm very, very proud of in R&D in an IFF to really drive these platforms. And we're talking about experience here, some 20, 30. I was on a service award over a month ago, 50 years experience in these applications, in these expertise. Most of them have a PhD or Postdoc in specific areas. So really driving this differentiation capabilities to drive these platforms. So let's talk about a couple of these capabilities, natural product and crop science, really understanding what nature actually gives you and really understand how can actually use waste from food or nature to give you upside -- upcycle ingredients and upcycle such a natural products and flavors. Sensory and consumer science. We're really not just studying flavor, taste and scent anymore, but the overall well-being of that consumer, and that's going to be important. And on the bottom, we see similar capabilities in biotechnology, protein and pathway engineering, process engineering, molecular biology and genomics and applied microbiology. This is super exciting for us because it brings us back to really leveraging biotech and multiple capabilities in multiple areas and applications, including our CRISPR-Cas technology that we utilize in many of our products. And then in the analytical sciences area, we can really look at products in a molecular way right now that we couldn't even do 2 years ago. So really studying the 350 molecules and atoms in vanilla and other natural products and really deciding what we're going to do and how they interact with other molecules in an application? And then the area of material science and application science, really stunning the interactions of molecules and interactions with ingredients together, but also making these materials biodegradable and renewable. And then data science and automation. Frank mentioned that we're really going to accelerate R&D through this data science in innovation through AI, robotics and data gathering. And of course, this is all grounded in sustainability. How do we actually design our products with sustainability in mind. It's not just a nice to have, it's a must. And this is how we approach almost every project in R&D with sustainability. And we're also grounding our regulatory and our safety protocols and also grounded in intellectual property protection. So let's look at biotechnology, our leadership in the biosciences and this really came with the merger of DuPont Nutritional Biosciences R&D into our organization. Did you know 1 in every 3 probiotics is an IFF probiotic? And I know a lot of you out there are going to like this, 20% of our global beer out there is brewed with an IFF enzyme. And 50% of cold water laundry detergents have an IFF cleaning enzyme, and 1 every 5 baked goods is an IFF baking enzyme, and 1 in every 3 yogurts has an IFF culture in there. To actually make those claims and really say that, you really have to reach a massive market, and you really have to actually scale in a way that Frank had talked about. That large scale goes across the globe and actually allows us to scale this technology to meet 1 billion consumers plus a day. We have 30 manufacturing sites dedicated just to biotechnology. 600 scientists as the 3,000 scientists and engineers that we have dedicated to biotechnology with 10 R&D centers. So really strong innovation in manufacturing sites, but state-of-the-art large manufacturers of biotechnology with also pilot plate scaling. And we really can look at biotechnology in several ways and several lenses. First, we try to get the customer feedback. What is the customer actually telling us? Is biotechnology is a royal tool to do that. If it is, we look at what nature is actually given us, what's the hints nature gives us with the microbes and enzymes. And then we can sequence the microbes and enzymes and the genetic code of those and really look at protein engineering to then use what we call synthetic biology or using cells to be our cell factories to make our products. And of course, we use other tools such as high-throughput assay screening, strain testing, and clinical trials to prove out this technology. But this is several ways we approach looking at making enzymes, cultures and probiotics. So really state-of-the-art discovery screening process to protein engineering for enzymes, to best-in-class cell factories, to probiotic clinical trials and, of course, state-of-the-art industrial capabilities. Our ability to scale is unparalleled. One, we can go from 1 liter all the way to 300,000 liter. And that's impressive. Not too many companies can actually say that, and probably only a handful can say that we can scale at that large. And with the [ steel ] on the ground globally around the world, we're getting better, we're getting to scale and we're going to scale more in the future. And we know not too many companies can do this because we're often asked to scale their biotechnology with our [ steel ] in the ground and with our assets. So this is an impressive unparalleled approach the way we're approaching this in the future, but also how we're going to look at making products in the future with this technology. And let's look at the rest of the end-to-end innovation process. R&D is a key partner to the business. We don't work in silo. We work closely with the business and the customer to really gain those consumer insights in the beginning. And these insights, I'll talk about a little bit later -- from multiple different ways. We also look at foresight-driven insights and market trends. Then we developed the growth accelerators. This can be growth accelerators from the division, sustainability-led growth accelerates, looking at areas of capacity release and screen improvement and digital transformation to deliver these advantaged ingredients, new products and new processes, but also more importantly, taking these technology to a total other addressable markets. For example, can we take Scent to the metaverse and to gaming, to high-growth areas? And also given the industry-leading performance, accelerated growth rates, improved margins, and of course, as Glenn, our CFO, like this, strong return on that capital. that we have in R&D. Really, we also have a disciplined approach of looking at the portfolio. We just did a top 50-view of our enterprise-wide IFF projects out there in R&D. And it's just as important to take a project off that list and actually put it on the list. So we have this fail-fast mentality really taking things off and putting projects on to really accelerate and align with that business. And then really using data, we probably have more data in any function at IFF, but also in the industry of taking that data and making better decisions to accelerate innovation as we move forward. So if we say we're going to deliver it in '25, I challenged the organization, can we do it in '24 or '23. And this is going to happen with data analytics and data-driven choices with AI, robotics and data gathering. Then we progressively derisk that project as we move forward to commercialization. So I'm often asked, with these great capabilities, how are we actually going to win? Well, we're going to win through delivering growth through innovation and technology. We're going to continue the leadership in flavor and ingredient technologies, scent innovation, health and biosciences and pharma, but also double down and focus on some of these key accounts, what I call ReadyNow technology. And can we sell to new customers? Can we sell this Readynow technology of this pipeline to other areas and other total addressable markets? We'll also build strength. We'll build strength in the biotechnology area. We continue that in our application science area. As the application gets more sophisticated with our customers, we have to spend a lot of time in application science. Then we'll use acceleration of R&D with AI, robotics and data. And then we'll invest for growth. What does the lab of the future actually look like in our digital transformation? How far are we going to take microbiome and crop biologicals? And then really transform the pallet with catalog transformation, which will change the industry. So that's how we're going to win. We're going to win through sustainable solutions, material science and delivery, bioorganic synthesis and, of course, our biotechnology platform. [indiscernible] pay dividends, for example, in the Scent area, really looking at Catalog transformation to differentiate ourselves with our finding commercial fragrances and also utilizing scent to increase your wellness, to bring back your memory, to increase cognition and also to help you sleep. And also in the probiotics line in health, really taking a leadership position there, but also taking the leadership in the microbiome. And also looking at cleaning enzymes and clean polymers, such as our Polysaccharide program to really increase that cleaning and laundry and dish. And then Better For You Nutrition, really take -- giving our consumers choices in nutrition and also in alternative proteins and making these tastes great to have culinary effect. And then preparing for the future of farmer, biologicals, biological enabled excipients will be key for us. I'm also asked also, how do you decide in your short-, mid- and long-term pipeline? And this can come from several insights approaches. One, from the customer, really listening to the customer what they really want, what they really need, and how we're actually going to deliver that for them. And then we work with the divisions really the divisional insights. What are the market trends out there to help us decide on that priority. And then we will look at foresight approach, what we call a panoptic approach, looking at some of the foresight thing in an R&D. And of course, working with our external partners, start-up companies that we invested in, partners, academia to really look at some of the external drivers. And last, but not least, the consumer. The consumer is really going to drive what we do in R&D, so we're going to drive what we actually do in the future. So this is how we actually look at our consumer trends and insights in short, medium and long term. And this actually leads to global macro trends. And we believe we're set up well to align with these global macro trends such as improving home and personal care, to empowering well-being in healthy lives, to transforming food systems and accelerating climate solutions. We believe we're well prepared for this because of our capabilities that you see on the bottom with the biosciences, chemistry, material science and data science and application science in there. But let's take a look -- closer look at our pipeline. When we look at our pipeline and our innovation to drive future growth, we take the macro trends from the left that I just mentioned, and we're well aligned with the platforms I mentioned earlier. And then from there, we yield a strong pipeline of products to really differentiate ourselves with the consumer and with the customer. So let's take an example here. Proven Home and Personal Care well aligned up with our buy based active enzymes and polymers platform. And then that yields a pipeline of renewable engineered polysaccharides or cleaning polymers or cleaning enzymes. And if we go to the bottom here, accelerating climate solutions. That's our delivery systems platform. And then our next-generation biodegrade renewable non-microplastic delivery systems will utilize to achieve those specific areas. Also want to note we're accelerating R&D. We're moving the pipeline across the finish line. Greater than 50% of our resources and pipeline will be commercialized in '23 and '24. And this is exciting for us because it allows us to get products across the finish line and then build the pipeline strong in the beginning. So let me talk about a couple of projects that we believe are iconic or will change the industry. One is what we call these natural biobased biodegradable polymers that will have transformational impact. I understand we have a new name for this. I think it's designed enzymatic biomaterials or DEB is what we call it. But imagine all the polymers out there that we have that are synthetic, that play a role in home care, food and pharma, personal care and new applications. But now I can say I can make these polymers biodegradable and renewable and versatile by starting with just simple sugar. Imagine that. Starting with simple sugar to make a biodegradable renewable polymer that's high performing, that beats what we have. It's not only better for you, it's better for the environment and better performance for our categories. And this will impact what you see on the shelves today in laundry and dish and food and pharma and in other new applications, and we believe this is the future. The other areas in alternative protein, what we learned from Soley and St. Louis over 30-plus years of alternative protein, we can apply it to other alternative proteins, really get to closer to meat, closer to milk, protein. You'll see a lot of those examples downstairs in our innovation stations. So a new food system is evolving. And we believe we're going to be part of that and take the leadership position in those specific areas. And it's not just for flexitarians, it's for all consumers because we know we can make it taste great. We know we can actually make it taste well in all applications moving forward. In the other area, consumers are seeking foods and improve their health and wellness. And we continue to work on this, and we continue to add cultures, enzymes and work on modulation, the next generation of modulation for this large pipeline for clean label for their food systems. And this is going to be important because people are going to look for nutrition from foods and the wellness from the food area. So really providing natural building blocks for healthier and functional foods. And then the microbiome, microbiome-based probiotics and live biotherapeutics, again, the future of what we're doing. It's taking a leadership position in probiotics to balance your health and wellness, but also looking at the microbiome in the gut, but also in the skin. And this is going to affect several factors in the gut, brain health, metabolic health, skin health and also infant health. And again, we're taking a leadership position here, moving forward, and we'll -- this -- more to come on what we're going to produce and strategic focus on our R&D efforts in these areas. And then last, but not least, our IFF, what we call EcoCaps, expanding the leadership position in delivery. We've already been a pioneer over 20 years in delivery systems. Now we're going to make this biodegradable and renewable and really deliver the performance that we need in multiple different applications of Scent, Food and Actives. We can also digitally print these delivery systems on multiple formats with our digital technology and delivery systems. So more to come on this, but you'll see some examples downstairs in the innovation center of our leadership in these delivery systems as we move forward. So hopefully, I gave you a snapshot of what R&D and innovation is all about at IFF, really driving greater differentiation through R&D innovation and the investment that we have. As you saw, the broad capability that we have with the categories that we're going to approach. We're also going to accelerate innovation through AI, harmonization, data and robotics. We're taking a leadership position in biotechnology and also taking a leadership position on scaling that biotechnology moving forward. And the strong R&D pipeline, we believe it's strongest in the industry, but we also have a disciplined approach on that return and invested capital. So excited to be here and talk about IFF innovation. I'd be happy to answer any questions in our Q&A session. Make sure you go downstairs and experience innovation firsthand. But now I'll turn it over to Mike. I believe we have a break coming up.

Thank you. So that concludes the first portion. We're going to pause the webcast. If I can ask everybody to come back to 2:40 that would be fantastic. We'll get in your seats, and then we'll go into the financial perspective. So we're on break now till 2:40. Thank you. [Break]

So I want to add my welcome to Frank and to Greg. So I appreciate everybody joining us today, whether virtual or live. It's great to see many of you live. In my 1.25 years, I've not met a lot of you live. I know a lot of you are thinking the same thing. Richter is a lot shorter but better looking than Zoom. So I appreciate that. So -- and I'd also like to thank Mike, and Mike for this really nice venue. Hopefully, we have some time for the downstairs. But I guarantee you, if I were to do this, we would be in Newark at the Holiday Inn and eating plant-based Wendy's. So that will be the next show. So I have 30 minutes up here. My objective is in 30 minutes to go through roughly 15 slides. What I'm going to do is connect what Frank and Greg talked about relative to the numbers. So the strategy and how that translates into our commitments in terms of our numbers. I'm going to do that by talking briefly about us and our sector, give you a little bit more perspective, dive into 2023 outlook since that's a unique situation given the economic environment. Then I'm going to spend the bulk of the presentation talking about '24 through '26, and we will systematically peel through revenues, productivity and then capital structure from the standpoint. So before I do that, I want to actually start with sort of 3 messages. As Frank had mentioned, the core of this is based on a very detailed assessment of where we are. So it's a very fact-based view in terms of what our future and what we can deliver, combination of understanding our business, benchmarking and very importantly our key initiatives to get there. Secondarily, 2023 because of the economic backdrop is somewhat of a transition year. That means more modest top line growth, which puts pressure on the financial delivery, but that does not mean that it's a kitchen sink year. We are very, very aggressive in terms of execution. We are moving fast in terms of investment and making sure we realize our long-term objectives. The third thing, building on that, as Frank had mentioned, a lot of our strategy is not just the math behind how to get there, but it's the execution and the incentive systems behind that to make that happen. So with that as a backdrop, let me move to the first slide. And I wanted to remind us in terms of kind of when you're, in essence, making an investment in IFF, you're not only making an investment in a great company. And Frank did a very nice job on the right side of this chart articulating the strengths of our franchise and the potential in terms of our breadth, depth, R&D capabilities and scales, but you're also making a bet on a very attractive sector. So within our space, we have a lot of natural dynamics that are driving top line. So as Greg had mentioned, inherently, the consumer dynamics in terms of pursuit of health, wellness, sustainability, et cetera, is driving natural tailwinds to growth. But if you add on top of that, that our customers are continually seeking innovation, and that innovation is driving more complex formulations in terms of what they're doing. So the dollar content relative to the finished product from the consumer product is also increasing. So that not only provides very good top line dynamics. It also provides a very sticky and robust set of relationships with our customers. That lends to great margin resiliency as well. In addition, we are in a sector that has great resiliency relative to economic cycles. So traditionally, in a recessionary environment, our space will have about a 2% decline in terms of volumes. And generally, within 12 months, it basically rebounds. So it's very different than other sectors from the standpoint. The third item is around scale. This is an industry that will continue to benefit from scale. So the ability to have a global supply chain to invest in the scale that Greg described around R&D capabilities, the ability to build a true world-class ESG platform, those are important for winning in the market going forward. And then lastly, all of that lends itself to a strong, stable cash flows and a high return on invested capital for the business. So you get, in some sense, a double benefit from being both investing in a great company as well as in a great sector that has natural tailwinds over the coming years. So now let me talk a little bit about 2000 -- or setting up 2023. This chart is not new to any of us. So we are still in a very volatile environment. We are facing a number of headwinds in terms of what's happening on a macroeconomic environment standpoint. So we're clearly seeing a dampening of consumer demand. We clearly still have some level of inflationary pressures, although dampening supply chain globally, while better, still has a level of uncertainty and risk. And then lastly, labor markets are still relatively tight, which is compromising both quality as well as the cost of that. I would say that, that picture is evolving, as we'll talk about in the next slides on 2023, is that, number one, we are seeing improvement on inflation. We are seeing now a deceleration of the growth. We have more modest expectations for next year. We are clearly seeing better performance in the global supply chain. Certainly, recent announcements out of China have been beneficial relative to that. However, the inverse is on the demand side. As we spoke about at our last call, we are seeing a combination of slowing consumer demand and then destocking from customers. That creates a very difficult environment for us to operate and one that we're cautious in as we think about 2023. So on the next slide, basically, we really want to talk about 2 planning horizons. So recognizing that the short-term 2023 is more volatile, we have a different set of expectations versus the longer term. So we're expecting more modest demand in the marketplace. We're expecting some level of inflation needs to be offset. We are still expecting to have to be cautious on the supply chain. But that translates into more modest expectations on the bottom line. But as mentioned, we are still going very fast with a sense of urgency on execution against our strategy. The second time frame, which basically was focused on by Frank is 2024 to '26. We are assuming we will enter a more stable economic environment, normalized growth in industry of about 3% growth per year. We're expecting to be in also a more normalized lower inflationary environment at that point, call it, circa 1%, which is legacy pre-COVID in terms of our industry. And we're also, at that point, expecting to begin to turbocharge and ramp up our execution. So while we're moving fast, full realization of the benefits relative to our strategy are much more expected in the second horizon here, 2024 through 2026. So we want to spend one more page talking about 2023. Our expectations at this point, in addition to that, some of the trade-offs that we're looking at relative to managing next year. I would caution, these are still preliminary outlooks at this point. We have not finalized the plan. There's a lot of moving parts, particularly in this type of environment. That said, our volume expectations are fairly modest, as we mentioned on the last call. Our outlook is circa 1% in terms of volumes, much more back half of the year versus first half of the year. We are expecting at this point likely to be planning down in terms of the first half of the year. Secondarily, in terms of the price equation, mid-single digit in terms of our overall outlook in terms of pricing next year. That is roughly 2/3 associated with raws and about 1/3 energy. Much of our pricing on energy is now via surcharges or variable pricing. So that will go up and down with the energy environment. The energy environment has shown some relief recently, so that will factor through. That translates into revenue guidance directionally about mid-single digit in terms of the performance next year. Productivity is key for next year. So as Frank mentioned, not only are we accelerating the in-flight initiatives that we have shared with you in the past, but we're also moving on an additional $100 million run rate cost reduction. Think about that as a $50 million impact next year, full realization of the run rate of $100 million in the first half of '24. So that's how we're thinking about the equation. That top line about 1% basically price equal to inflation. We are expecting an offset equal as we did this year. And productivity, we expect to get us on a like-for-like basis of mid-single-digit EBITDA growth. Like-for-like, currency-neutral, in addition, reflects the first half of the year loss of Microbial Controls. As a reminder, we sold that business at the end of the second quarter. It's roughly $35 million of EBITDA when you normalize this year for the full year basically exit of Microbial Controls. On the right, I want to spend a couple of minutes talking about how we're thinking about managing the year. Next year, we are intensifying our focus on cash flow. In light of what's happened this year with the inventory builds, we're being extremely aggressive in managing our working capital and being thoughtful on CapEx spend in a way to generate as much cash being, of course, very focused on maintaining service levels with our customers, so being thoughtful. So as we monitor and manage through the demand market, there is potential for us to even slow more production, i.e., to correct inventories that may have some additional pressure on the P&L. That being said, we think it's the right answer for basically driving cash flow for the year and helping our deleverage goals as well. Pricing, needless to say, is still a variable for next year. It's about half what we had this year in terms of overall pricing, more surgical, more surgical in terms of differentiation between energy and raw materials. And in addition, we've been very careful in terms of implementation of pricing by business unit, by region to reflect a balance between volumes and price for next year as well. I will tell you that our pricing teams are in market now, and they are actually executing quite well. So I'd say at this point, we do feel optimistic that we will be able to offset 2023 inflation via price. As Frank mentioned, we also need to very carefully navigate top line versus productivity. So as Frank had mentioned, we are ring-fencing the customer-facing resources. So think about that as the roughly 1,500 account managers, our frontline folks that work in our R&D and creative centers, our product specialists, et cetera. They're not in scope relative to our incremental cost reductions to make sure that we're focused on folks that are affecting revenue and keeping them out of the equation. But we are also, as I mentioned, we want to start taking some of that productivity and funding basically some of our major growth initiatives. So we will begin to ramp up in that guidance is an assumption that we will begin to basically launch on our productivity. And then lastly, as Frank had mentioned, is completing the current in-flight divestitures. We expect to have them done next year as well. So that's it for 2023. What I'd like to do actually now is move to the second half for the majority of this presentation and talk about our objectives for 2024 through 2026. So the right side of this page is what Frank showed at the end of his presentation, but let me drill down a little bit more underneath the numbers. So we are basically targeting to achieve a 4% to 6% currency-neutral sales each and every year through the '24 through '26 cycle on average. Think about that as about 1% we're assuming is basically price/inflation. So I would say, again, a legacy environment that was typically normal. So we are saying 3 to 5 points of volume and relatively small in terms of the inflationary impact within that. And I'll come back to unpacking how we think we could get to a 3% to 4% annualized growth in volume from our current run rate. Second thing is productivity. As Frank had mentioned, we are targeting between $350 million and $400 million of net productivity by 2000 -- actually in [ 2025, not 2026 ], a 3-year program. We mentioned this at our previous investor calls in terms of that. I would emphasize the following. One that is a net number. So that's net of investments. We are planning to invest $150 million. That's an annual expense, and I'll come back to the detail. That expense will be invested in R&D, our commercial capabilities, sales, marketing, et cetera, and in technology. So an annual increase in our technology spend in addition to the capital. That's also off the base of 2022. So think about the forecast this year in terms of our cost base and basically off that. And I'll come back in more detail on the productivity numbers. Importantly, that math drives a 8% to 10% CAGR in this horizon in terms of EBITDA on a currency-neutral basis. It drives a little over 250 basis points in margin, and it will generate over the next 4 years on average of $1.5 billion of adjusted free cash flow. As Frank had mentioned, in terms of our capital structure, we are targeting to get to 3x or less basically net debt to credit adjusted EBITDA in 2024. We are targeting to spend roughly 5% in terms of sales on CapEx. Within this horizon, about 0.5 point of that is related to ERP investment, and I'll come back to that. And overall, again, this is the financial equation that we have for this duration. And what I want to do now is really begin to talk about how we develop the plan and then very importantly, begin to talk about the drivers of revenue, productivity and basically our capital objectives. So Frank had mentioned this early on is we have spent quite a few months throughout this year basically dissecting our business and then turning that into a plan. So there's 3 sets of inputs in terms of the development of those numbers. It started with a very detailed diagnostic of the current state of the business. So we toured our sales drivers and performance metrics. We took a look at our innovation processes, our pipeline, as Greg had pointed out in his presentation. We looked at every detail behind our cost structure as well as our productivity programs in flight. And working capital also, we tore apart in terms of diagnostic of how we're performing and where we are versus peers. The middle, we also did a lot of benchmarking. So we basically did a bottom up. We also did a top down in terms of the -- looking at the diagnostic in terms of benchmarking. So where are we versus our best-in-class peers and thinking about our objectives. But then most importantly, we actually spent months with the businesses and the functions in developing very discrete plans. So regionally and from business unit, how are we going to drive growth? What were the investments required to do that? How do we think about productivity delivery in terms of where within the business system from a standpoint, and again, every aspect in terms of working capital improvements as well. So a combination of an understanding of what's working, not working, looking at benchmarking from an outside in, and then third, validating through our own internal plans of basically getting there. So that was basically resulted in the following. One, we used the ROIC framework to inform how we would apply specific drivers -- financial performance drivers across each of the businesses. And then we've identified basically 4 buckets, if you will, of performance drivers. The most important is at the top, and we'll talk about this in a little more detail, is basically accelerating our sales trajectory. There are 4 components relative to our current run rate in driving that. They are number one, continuing to enhance our supply chain. That's a combination of capacity, inventories and continue to better in meeting service levels and demand. Secondarily, accelerating the revenue synergies, which I'll talk a little bit about, but achieving that $400 million of revenue synergies end year by 2026. Third is basically leveraging innovation. So it's the pipeline that Greg talked about, but part of our investment is actually to add more into R&D and both bring more of our current pipeline to market but also to invest in a bigger pipeline for the future as well. And then lastly, as Frank had mentioned, it's very targeted investments to drive outsized growth in a combination of our higher-return businesses and more attractive growth markets such as Asia. Second is productivity. Productivity is both a source and a use. It's a source of margin enhancement relative to driving that 250 basis points, but it's a use, as I mentioned, that $150 million investment back to the top line. Cash flow and CapEx, as I mentioned, really focusing on achieving top-tier performance in terms of our working capital metrics, being disciplined in setting capital targets, CapEx targets by business consistent with the ROIC framework and being very, very thoughtful in terms of making sure that we generate as much cash as we can to help deleverage. That is in concert with the portfolio decision. So the cash flow from operations and completing our divestitures in place has been very important as well. So now let's actually talk a little bit about how that framework applies. It's very important to make sure that you understand that one size does not fit all in terms of how we're trying to apply the framework. So these are the 3 baskets. So the 3 baskets of market attractiveness and returns on the business. So as a reminder from Frank's presentation, we have the top group invest in winners, so that includes essentially, all of our Scent business, Culture & Food Enzymes, our more attractive, higher-return businesses. That's 55% of our revenues, but it's north of 30% return on invested capital as a basket. Our goal is to drive outsized growth twice the market relative to those. To maximize the core is about 1/4 of our revenue, and on average, it's a little bit north of 15% return on invested capital. And then our bottom basket is optimized underperformers. It's about 20%. It has a lower return on capital of around 8% as a group. And our goal is basically to probably have a slightly below in terms of growth. But down below, we're trying to illustrate, though, the application of the different financial drivers will vary. So as an example, supply chain fixes apply across the entire portfolio. We were very focused over the last year plus of making sure we get the right customer service levels that we basically debottleneck the system and able to meet those needs. In addition, productivity, to some degree, also is relevant for all businesses, although more highly skewed to the right. And then beyond that, basically, we've highly tailored our investments and how we think about our capital. So our growth investments are highly distorted towards the winners, although some is being invested in the middle basket as well. So it's not all just in one. And in addition, I would say the capital intensity in terms of managing our working capital and being thoughtful on investments, more disciplined on the right side of the chart. So our playbook is extremely surgical business by business in terms of what we're trying to do. So let me talk about revenue. And this, in some sense, may be the most important slide in this presentation. Because at the end of the day, achieving our economic objectives, financial objectives will be largely driven by success on the top line. As mentioned, that top line in part is fueled by productivity. But you fundamentally have to believe that we have to add around 2 to 3 incremental points of growth, which is volume in terms of the market. So as I mentioned, we spend a lot of time dissecting the business. So if you look at the last 3 years, and you normalize inflation, our volume growth has been a little over 2% on average for the last -- so think about the full cycle starting from '19 and basically running through the forecast for this year. And historically, there's been about a 1% level of inflation, i.e., price within the market. So 2% to 3% is sort of a normalized rate. Our goal, as Frank had mentioned, is to drive it up to 4% to 6% in terms of the growth. And it will be driven by 4 different activities or initiatives within the enterprise. First is fixing supply chain. It probably has cost us about 75 basis on average per year over the cycle of a combination of low inventories and capital constraints in terms of our ability to actually meet demand in the marketplace. Those have largely been fixed. And what I mean by that is we've invested higher CapEx. We went from less than $400 million 2 years ago, $400 million last year, we'll be at $530 million this year. Our more attractive businesses, the Enzymes, Cultures business, et cetera, we've invested in CapEx basically to allow them to grow. Our inventory levels are much higher. Our service levels, as Frank had pointed out, were much closer to the standards in terms of where we need. We have to do some work to win back some businesses of byproduct, but I would say that first bar is in good shape to delivery. The second bar is revenue synergies. We realized $10 million of revenue synergies last year. We expect to realize around $80 million this year. So $90 million over 2 years against our $400 million goal. As Frank had mentioned, we are behind the original designs that were communicated last year in terms of our realization. However, after almost 2 years, quite frankly, our confidence level of how we get there and the ability to get there is much, much higher. So we have maintained the same objective of $400 million of revenue synergies in the year 2026. That adds an additional leg in terms of the incremental growth from our run rate in terms of where our business is at this point in time. The third is innovation. So those investments I mentioned in R&D, we are planning on targeting a 50 basis point increase in our R&D spend over the next 3 years. So think about us investing at a level to get to another 0.5 point in R&D. A combination of that investment and just getting more out of the current portfolio. And lastly, there's a big block, which is basically driving against our higher growth markets and very importantly, our highest-return businesses. So the flavors, the scent businesses that have very high returns, that's where we're concentrating not only our innovation budgets, but our commercial budgets and our technology budget to make sure that we enable those teams. So if we actually looked at each of these pieces, they mathematically would add more than that 200 basis plus in our math. But we, to some extent, obviously, want to haircut because there's overlap in terms of what those numbers are as well. There will be a ramp-up. We are investing now to basically begin to accelerate. We've done and have achieved some improvements, particularly in supply chain, but it will take us 12 to 18 months to get to a build relative to the execution. The next page basically talks about the nature of investments. There's really 2 buckets. We are increasing our CapEx, as I mentioned. So we're going from roughly a little less than 4% 2 years ago to targeting around 5% of CapEx. That includes 0.5 point in ERP, so we will be spending $300 million over the next 5 years in aggregate to implement an upgrade of our ERP systems, a combination of upgrade and integrate SAP so that's within it. So that will help from a technology standpoint, also help from an efficiency standpoint as well. But we are investing about $150 million or ramping up $150 million of investment. That basically is in commercial. So think about that as sales, think about that as product specialists. Think about that also is marketing folks. Also, as Frank had mentioned, relative to organizational change, we're investing more in a centralized commercial excellence. That will be important to helping drive and capture the revenue synergies as well as providing market intelligence and discipline relative to sales execution as well. And very importantly, analytics, so digital analytics, including CRM is very important for that. The second bucket is innovation, as I mentioned. So it's a major thrust in terms of our ramp up in terms of our investment and then technology. So technology is not only capital, but had been an ongoing expense increase to basically make sure that as an enabler to basically driving a combination of top line and productivity. So this results and about $150 million increase in terms of our expense structure in the next 3 years. The second chart here, maybe the second most important item, you sort of have to believe in the math is productivity. We have talked about our productivity objectives in past calls. Our total goal that we'd mentioned previously was basically $250 million to $300 million. We have an incremental $100 million basically targeted at this point that gets us to a cumulative $350 million to $400 million. Again, that's off this year's cost base. So think about that as basically 3 years out in 2025, a reduction of this year's cost base and again, it's net of the $150 million of investment I mentioned. To put that in context globally, including our raw materials, we're about $10 billion cost structure. This is about a 2% productivity per year. If you exclude raw materials because obviously, it's more difficult in some sense or said differently, often, those are just priced through in terms of productivity. It's a 3% productivity per year. So it's not a massive number relative to productivity. And I can promise you, relative to the homework that's been done from operations to procurement, to sourcing and supply chain and now to our shared service and administrative functions there's a very clear line and path to basically achieving these numbers over the coming years. So these items are very much in flight in terms of our achievability of the numbers. Turning to the next page. Now I want to move to capital. This page should look very familiar. It's consistent with what we have presented in the past regarding our capital priorities. So just moving around the boxes from the upper left, debt repayment is a principal objective and the primary focus at this point in time. We want to get from our 4x basically down to 3x and that will be accomplished through a combination of deploying cash flow from operations, particularly in acceleration to next year and the proceeds from divestitures that we currently have in flight. Secondarily, from a dividend policy, we are committed to continuing to grow the dividend. We have to balance that over time with the dividend versus share repurchase, so that over time it will be a consideration for us. Three is portfolio optimization. So as Frank had mentioned, we began early this year and mentioned we had 3 to 4 different businesses we were planning to take to market. We have taken 3 of those to market. They are all actually in late stage at this point. We believe and estimate that we will achieve $1.2 billion of gross proceeds from those 3 transactions, as Frank mentioned, by the end of the first quarter, we should be in a position to have them announced. They should be closed by the end of next year. We still have one additional transaction that we've not proceeded on this point. Part of that has been -- we just had a lot on our plate. So we focused on the 3 that were sort of more manageable at this point in time. Part of it is the market has been choppy. But as mentioned, we will be taking a closer look at the portfolio in the first half of next year from the standpoint and then fourth is share buyback. We will -- basically, we plan on reauthorizing our buyback program once we get to the appropriate leverage. So our goal is 3x or less in 2024 and in terms of our net debt to credit adjusted EBITDA at that point in time. So we continue to use this framework as we presented in the past in terms of our priorities. Deleverage from cash flow and also from portfolio optimization is key for the next 2 years in terms of getting to that 3x or less. So relative to cash flow, this has not been a good year. So it's $600 million of delivery. We have had the impact from a high growth in inventories. Those high growth in inventories have been a function of 2 things: inflation basically running themselves through our cost structure. And then secondarily, the demand has fallen versus expectations. We are aggressively working with our businesses and our operations team to address that. This will be a big factor that we will focus on in February regarding 2023 guidance at this standpoint. But a combination of that as well as growing our earnings being very disciplined in terms of the capital management. That's a combination of CapEx as well as working capital. We do believe that $1.5 billion is easily achievable on average per year over the period 2023 to 2026. So that's the other item regarding capital. And then lastly, before I close, it's very important as I began the discussion to talk a little bit about execution. So the numbers, one can say they hang together based on what we know about the business, what we know about the market, our benchmarking and our specific initiatives to drive but what's very important is that complemented with a series of activities, series of initiatives and body of work, if you will, to make sure that we execute against these numbers. So on the right side, we outlined some of those initiatives. So very importantly, if we think about net sales realization, we are doing a ton to accelerate the execution on the top line in terms of our volume results. So the establishment of the commercial excellence team, actually having much more disciplined rigor in terms of analytics, CRM, et cetera, and making sure that there are sales incentive programs, as Frank had mentioned, are extremely aligned. We still are doing a lot of work in the [indiscernible] pricing. Pricing is not over from the standpoint. So we -- in the last now 18 months, there's been a big investments in tools, process, training, et cetera to enable our sales force to be more effective and to be more targeted relative to pricing. In a deflationary environment, those tools are going to be just as important if we manage to way down the curve as well. So those are very important in terms of net sales realization productivity, we are off and running, but have more to do. So maintaining a very strong control [ tower ] mentality in terms of people who have specific targets, dates to deliver them, accountability and tracking against that's extremely important. And by the way, continuing to mine additional opportunities. So we have to get out of just programs into a continuous improvement environment around management as well. Dedicated ERP execution team. So a big effort for us in the next 5 years is the $300 million investment in basically integrating and updating our ERP that has to be accomplished with a dedicated team to basically provide oversight. The same in working capital. We now have a team dedicated across the businesses. Obviously, the operations, the finance team they're setting not only very discrete targets by business. We're also folding in a charge in terms of capital against the businesses relative to that to encourage them to basically drive behavior. And then lastly, senior leadership. So as Frank had mentioned in his presentation, really the leadership is tied directly to your outcomes. So total shareholder value return. In addition, ROIC. Total shareholder value return is very tied to basically 2 variables, as you know, top line growth and ROIC. So in effect, the senior management team is tied to exactly the same things as our investors are. So with that, let me close. To remind you, you're not only making an investment in a great company, but you're also making investment in a great sector and a great industry with lots of natural tailwinds. We are very intently focused. Hopefully, you take that away from today, a fully realizing the potential of IFF and in turn delivering significant shareholder value. That value basically is through a very detailed plan that starts with understanding the return potential of our business and the market attractiveness and making sure we align our capital and resources against that priority one is top line. Making sure we go from our current run rate to a higher growth rate. In addition, productivity behind that in part to support the top line in part to actually enhance our margin as well. A very clear set of capital objectives in terms of our spend, our working capital goals and our cash flow. And then lastly, as I mentioned on the previous page, it's all about making sure we are able to deliver those by tightly managing the execution across the enterprise. So with that, I'm actually going to turn this back to Mike.

Thank you. If I -- we're going to turn to the Q&A session, we have about 30 minutes for Q&A . Tucking up to EC join on stage that would be great. And if someone who's not mic can grab a mic or 2 that would be great. So I think I can see most of you. I see Gunther right away off the top. So maybe I'll pass to the middle. I may get as difficult as we can get to start. That's great.

Gunther Zechmann from Bernstein. Firstly, could you just confirm that all the targets are organic in particular, is the $1.5 billion free cash flow target subject to change for any bolt-off divestment and then tied in with that, how much EBITDA would leave the company with a $1.2 billion of proceeds that you're looking to announce by the end of Q1, please? And then lastly, what would be your ROIC if the optimized underperformers, that bucket of 20% of sales that you highlighted was either fixed or divested please?

Number 1 is the numbers that we presented are -- include the divestiture of microbial control. So there's a half year we lose next year. We've not assumed or taken out the other divestitures, which are not finalized. So we wanted to state the business as is at this point in time. Gunther, we'll have to come back and basically present sort of the economics of kind of post departure for reasons of -- we're in flight at this point in time. We don't want to disclose a lot about the economics of those businesses at this point in time. So once we're in a position of having them announced, we'll provide better clarity relative to the overall economics of that. And we'll also be able to talk a little bit about the ROIC implications because those businesses fall to the right side of that chart, as you would expect.

Maybe if we can go to Lauren right in the middle here, that would be great.

So Frank, one thing I was surprised about was to see the revenue synergies featured so prominently in the presentation and also in the algorithm because when I think about the way that you're planning to restructure the operating model of the company and being one company, revenue synergies should be irrelevant, right? There should be no such thing. So I was just curious on how you would respond to my reaction, right, and why this is a part of the conversation, why isn't all just let's go out and get the growth, and there's no more what's the synergy versus what's not?

Yes. Lauren, I'll start and I'll also maybe ask some of our BU leaders who have been working on this as well. I tend to agree with you, Lauren, is that -- our overall objective is in that range of 4% to 6%. So start there. So you're right. However, as we've looked at it, and it's probably been through more of the current lens that we're in, obviously, within the Nourish division, we see opportunities. But then we also see opportunities between Nourish in health and biosciences, also health and biosciences [ insight ]. When we looked at our algorithm, Lauren, we kind of took it from that lens and said, we do see, and Glenn mentioned this year, we're making progress. So we do see the opportunity, if you looked at it kind of in the construct today, that we can get to that $400 million based off of engagement with customers, a targeted effort, changing incentives, accountability and everything else. As you start to move to the new model, so we've kind of looked at it through [indiscernible] it is going to be about driving top-tier growth in that range of 4% to 6%. And at some point in time, we may have revenue synergies potentially go away. But that was kind of the work. But we're confident that as we've looked at it now and have learned a lot based on the work that we've done, we think this is a key part of that acceleration that we talked about to be able to get from 2% to 3% into that 4% to 6% range. I don't know if any of the BU.[indiscernible] Simon, I don't know if you want to maybe add something.

Am I -- can you hear me yet?

Yes.

Sure. I think it's a very simple representation of the new pools of value that we think we can generate through the integrated company. And so you really look at how we bring these technologies together to drive primarily yield improvement for our customers and/or to create better products for them. And when we look at it, I think you should -- in many ways, revenue synergies are synonymous with those new pools of value that we think we can drive. And so it's an important construct internally, which is sort of testing us against our -- the value that we can develop as a company. But I fully agree with you. One day, we will not be speaking about revenue synergies because the value will be fully integrated.

Great. Lauren, if you still have your mic [indiscernible] out to Josh, I think he's just right next to you.

Josh Spector with UBS. So just in some of the underperformers that you highlighted, a lot of that was the DuPont basically ingredients part of the portfolio. When you talk about some of the revenue synergies or where there's the opportunity, plant-based meat is always kind of the first one that's shown. Are those must fixes for you? Or if you can't fix them because of price or whatever it is and you divest those, does that change the thesis on the combined organization and ability to kind of solution sell into some of those markets?

Yes. I'll maybe get started, I'll let some others add. When we look at the portfolio and as we mentioned, we will look clearly, and you mentioned in that right bucket, some of the ingredients if it's strategic, if it's helping us to drive greater [indiscernible] growth, that's sort of that optimize where we are going to look at ways to improve the performance there. But if it helps us overall strategically, that will be a part of the discussion. With that said though, we are going to be really disciplined around that, right? So we really need to see are there portions of that portfolio that help overall IFF or with a customer, we'll take a look at it. However, there are also aspects of that portfolio. And we're just kind of highlighting big. But underneath that, there's specialty proteins, they're value. There's a lot in that bucket. And so we're going to be laser focused. And yes, where it helps us. Clearly, that may continue to be a part of our portfolio, and we'll push SKU rationalization, trying to drive a better ROIC, but it can help us with customers. We'll look at it from that lens. There are parts of it, though, where clearly, as we mentioned, it's going to maybe be hard that we're the best owner for some of those assets. And then obviously, we'll take a look at what else we may need to do, including divestitures. I don't know if anyone wants to add anything.

Yes. I'd just add one comment, [ it's Josh ]. It's a great question. You should not walk out of the room saying Bucket 3 is gone. Because your point, and that hence, my comment about being very tailored is, to your point, a lot of the revenue synergies sit in bucket 1 and bucket 3, right? So how we think about that. But we think about other levers, working capital, CapEx intensity, how we think about pricing strategies, regionally, et cetera. So we're being very thoughtful relative to how we basically tackle that as well. So don't think about that as bucket 3 is the divestiture -- and I would say, honestly, that there may be things in bucket 2 in the middle of that, that actually may have a higher return profile in someone else's business or other opportunities as well.

Maybe if you can come over here. Mark Astrachan.

Mark Astrachan from Stifel. Building on Lauren's question and maybe thinking about it in a different way. So your larger competitors or your large competitors, I should say, don't have the same revenue synergies in their long-term algorithm as you do, but they're putting up or they're talking about similar long-term sales growth algorithm. If you think about the premise of the acquisition of the Nutrition & Bioscience as part of it was offering a suite of products that others didn't have with the idea that 1 plus 1 simplistically equals more than 2. So if you take a step back and think about the premise of the deal, is that still the case? And are you now trying to kind of fix a whole bunch of integration-related issues or things that you found within the N&B business that were maybe underperforming to kind of get to a different level of growth, meaning in line with peers kind of looking at it, inclusive or exclusive of the revenue synergies. So that's one. And then just sneaking in a second question. I'm curious about the decision on the Board that you made in the press release today. You've got 14 members on the board, I think, today, 8 joined in the last year. Oftentimes, I think Boards tend to be kind of rubber stamped, so why are you doing this? And why -- is it going to be different? What sort of levels of accountability you're looking for, Frank, you're on the Board, but you're not the Chairman of the Board. So does this signify some sort of change in oversight that you're looking at from higher levels looking back down the organization?

Yes. And maybe I'll let -- [ Jen ], maybe I'll let you comment a little bit on the Board and what we're focused on. I'll maybe add a comment, and then we'll come to your second question as well. For your first question, I should say...

We can turn the mic on here, that would be great.

When it comes to the Board, we are looking at a refresh. As you know, we have a lot of legacy directors from the IFF side. We had some directors that DuPont appointed, and the Board is really taking the opportunity now to match the skills and expertise that we need to deliver the strategy that you just heard about today. So we have added Mark Costa, who is a sitting CEO, who will be fantastic in helping Frank and the management team address the issues that are unprecedented that we are all facing right now. We don't have the final slate for the May 23 Annual Shareholder Meeting. We are going through the proxy contest right now, not contest proxy prep right now. But we are hoping that we will continue to build out the Board to the exact strategy that we have right now.

Yes. And I'll add to that. So the Board construct today and what we've been discussing is that we have 14 members. I think the S&P 500 probably benchmarks around 10, okay? So we start there. And we are focused on saying that we should have a Board based on the company of our size of approximately 10 board members. So then in addition to that, while we are now making that transition from the 14 to 10, the other thing that we said is it is a great time to make sure that we have the relevant skill sets on the board as we're moving from 14 to 10. We want to make sure not only are the skill sets relevant as you can see with Mark coming on board, we're really excited to have someone that is a sitting CEO and Chairman, is dealing with a lot of the issues that we've been talking about today. So that is really the process that we have underway. We'll be sharing more of our plans as we head into proxy season and ultimately, the goal is by the time we get to our shareholder meeting in May to kind of have the reconstituted board market. That's the discussion. That's what we're trying to accomplish. Remind me the first question. I'm sorry.

Revenue synergies.

Well, you want to start Glenn?

I'd mentioned, Mark, is we're kind of on a curve here from, I'll call it, 2% volumes on our way to something substantially higher. You're right, mathematically, if I added up all those bars in terms of what we think we get to, it's going to be a bigger number. But we're trying to be realistic relative to degree of achievement, complexity, double count, and those sort of things. So I intuitively think that having spent a lot of time on our work and revenue synergies, it is incremental, but the business historically would not have been able to deliver that incremental growth standpoint. But we just want to call that out as one of the components as part of our build. So -- but we do -- I honestly believe that it will give us an advantage in the market at the end of the day.

And I want to add on to that for Mark. From a technical point of view, the premise of the deal does make sense because it allows us to actually study that 1 plus 1 equals 10 interaction of those ingredients. For example, EVA Pharma and I'm going to OTC, then I'm going to add a flavor of that, and then I can study both of those put the application science and drive a new opportunity. So those are opportunities that we always had in our mind before the deal, during the deal and after the deal that we're going to leverage that to create greater differentiation and add basically more products in the marketplace because of that.

Mark, if we can hand it forward to Adam. Oh, I'm sorry.

Adam Samuelson, Goldman Sachs. Two questions. Maybe continue on the growth discussion, maybe in a different light. The 2% to 3% volumes in the last few years would be below what you would look at as most of the peers in these categories, and I'd love to hear any reflection on maybe some of the areas where you think the company has lagged and reasons for why or specific sources of underperformance? And then the second question would be the ROIC framework and just make sure we're clear on how the company is actually defining ROIC. There's a very different asset base assigned to some of the acquired businesses versus some of the legacy businesses. And I just want to be clear about how the company is prioritizing or thinking about the capital charge that you're putting against the operating units because those are decisions they weren't responsible for. But there's a lot of intangible assets on this balance sheet that company -- your management team or operating executives have no control over.

Yes, perhaps I can answer the second part first. If we included the goodwill intangibles, those numbers will be a lot lower. We stripped them out for that reason exactly. So we're looking at like-for-like so really what's the dedicated capital against each of those businesses from the standpoint. So we're not sort of burdening them for the acquisition costs associated with the deals. So Frank, if you want to talk.

Yes. And on the first part of your question, I think you -- as you mentioned, and we tried to highlight some of the near term, I would say, the last couple of year challenges. One, we clearly have identified that customer service, supply chain needs to improve. That hurt us, that cost us. And I think you quoted some basis points, but that was one. Number two, there were businesses where we had invested earlier to have the capacity needed to meet demand. That also hurt us. And now that has been addressed and fixed. And then three, I would say, is that while we have done some really good work with some of our key customers, key accounts, we have one supplier of the year from one of our key customers recently we -- any time you go through an integration or merger or some distraction and we probably lost some momentum, which is why I'm really staring into ramping up our commercial capabilities. So I think when you combine all of those, that's probably why you get to that 2% to 3%, which is a little bit lower than where we probably should have been. But that's now most importantly, as we've said, that's been identified we're acting with a sense of urgency, and that is something that we feel really good about that we're going to address it, which allows us to give us confidence in getting to that 4% to 6% growth range that we're communicating.

Adam, if you can go forward there, there you go, David.

Dave Begleiter, Deutsche Bank. Frank, first, on the 2% to 3% incremental volume growth, who do you expect to gain share from or who do you think will grow below market trend going forward? And just on the R&D spend, to spend more than your peers, but you don't grow faster than your peers. What about rather than spending more optimize we spend today before increasing the R&D resources that you're spending on the additional spend?

Yes. So from a share perspective, I'm not going to speak to specific competitors or who we think we may or may not take share from. What we are focused on is overall, and I mentioned some of our KPIs around pipeline flow, win rates, we need to tick up our win rate a little bit. That could come from either larger competitors or even smaller local competitors, okay? So that's something that we are clearly looking at. The growth also we anticipate will come from new customers and new acquisition, and that's a part of the emerging market discussion that we're having. To put in context, in many of those markets I highlighted if they're growing 5% and we're growing, let's say, 3%, some of this is footprint expansion, we're putting some additional resources, we think we can just capture additional business based on our capabilities. So that is what we're focused on. On the R&D spend, overall, we feel as though it is in the right range. If we do increase resources like we talked about, I want to make sure everyone knows it's going to be done in a very disciplined way. It will have line of sight to clear customer opportunities, demand. We are really putting rigor into our R&D reviews and operations. As I mentioned and Greg can add to this, since I've come on Board, and I've got some experience in this area, we are laser-focused every quarter looking at our portfolio, our pipeline. We do see opportunities to even accelerate some of our programs. It could bring things to market quicker. But we also are going to kill things that we don't see we're going to have a commercial benefit. So my message overall, a lot of rigor, a lot of oversight into our R&D spend, but most importantly, we do believe that the technologies that Greg highlighted are going to be a true differentiator for us and drive the growth that we're planning to achieve.

Great. Maybe we can go up and losing a lot of sight.

Yes, that's perfect.

Matt DeYoe from Bank of America. I guess, be it 2025 or 2026, right? Like what percent of your revenues do you expect will be in this invest in winners bucket? Is 65% possible, is 70% possible? Obviously, with divestitures, maybe you can move the bucket a bit. But what is the right number there? And then just trying to kind of balance some of the message here, there's obviously the inventory shortfalls causing 75 basis points of headwind or [indiscernible] to revenue. Conversely, inventories are way too high. We've got a cut inventories massively. So is that just a signal that procurement has been a massive issue over the last year or 2 years? And do you have a new Global cabin Officer? Or what are we looking at there?

[indiscernible] Do you want to start?

Yes, let me start with the second question. The -- I'll tell the 75 basis points I cited relative to volume lost. It's really a compounded effect, highly to some extent, concentrated in last year and then earlier this year. As you may recall, when the N&B transaction was finalized, we inherited relatively low levels of inventory. And we also in some key product capabilities, our higher growth we didn't have capacity. We were unable to meet customers' demand. In some cases, we had to consciously select to actually walk away from customers and basically move to customers that had higher profit or had higher demand and stickier and had to make some tough choices from a standpoint. So that hit us a lot last year. It's tailed into this year. We have been fixing the inventories, and we've been investing more in CapEx. Today, our system has the capability to meet demand, i.e., we can produce where we have inventories in place. The problem of the inventories this year really is confluence basically the demand drop. We're about roughly -- we're about 138 days versus 125 days of which our target -- and it simply in the last 6 months, the demand has slowed much more significantly than we had thought. So that's the difference from that standpoint.

Yes. And just to add to that, and that's what we've highlighted in particular, we do see some challenges from a demand perspective, really in 2 areas. We've highlighted the protein solutions. And then also was at a conference earlier in the year, we did see -- and this is basically a market phenomenon. We did see a significant demand pullback and drop, especially in market demand and probiotics in North America. So that's a part of actually what has been a little bit of a challenge from an inventory demand perspective.

[indiscernible], that would be great.

Awesome. Chris Parkinson, Mizuho. You had an interesting comment regarding your conviction level on the cost/synergy side despite being behind. Do you just mind elaborating a little bit on that comment and just what underscores your conviction over the next 2, 3 years, just based on what you've seen over the last let's say, 6% to 9% since that's been the trend.

It's Glen's conviction or Frank conviction? Or both.

Both.

Yes, yes. I can speak to it personally because -- and I'll rewind the tape a little bit, we had basically cited $300 million of expense synergies as our objective starting last year with the deal. We realized about 150 -- and by the way, of that $300 million, roughly half was procurement. A lot of that was direct -- that did materialize in that type of environment we've operated [ never ] materialized. The rest, about $150 million was largely captured. Those synergies largely were I have 2 Glenns, I don't need 2 Glenns, 1 of the Glenns goes, right? So it was very targeted from that standpoint, some indirect purchases, et cetera, we, as you may recall, began early this year to take a much more holistic view as opposed to just focus on integration is what's going on with our cost profile. So through benchmarking, a ton of outside support basically dissecting our operation supply chain or indirect spend. We have basically been standing up individually in these programs. There's one on operations. There's a couple on procurement. There's kind of a -- there's a direct and indirect. There's a demand management initiative. There's a set of supply chain initiatives, shared service build-out. And then lastly is the administrative. I'm confident because I personally, I am involved in those teams. We have very discrete targets against those teams, the timings associated with dedicated people. We have finance individuals basically providing oversight to those numbers. They're concrete in terms of the actions from the standpoint. And I have to be honest with you, that the place since it's really a combination of a bunch of small businesses, it's rife full of opportunity from a productivity, is historically, as it is -- the scale doesn't exist as the company has brought together everywhere we go, there are opportunities from our productivity and to be candid with you, the changes that have been made functionally from HR operations, procurement. We just announced a new head of GSS, very experienced executive. Those are also going to turbocharger action. So as you can tell, I'm very passionate, I'm also very confident.

And I had [indiscernible]. Maybe, I don't know, Ralf, who has joined us. Ralf Finzel, our new Head of Operations. Ralf, I don't know if you have any comment at all. Ralf has joined us from Honeywell. I'm going to add Ralf make a comment, because a lot of this sits within operations. But Ralf, you want to give a view?

I can give a little of comments. Maybe one comment about the inventory, for example, it's not sourcing and the capacity, it's really blending SOP process that was maybe today or the previous questions. On the productivity side, I would say, we have volume productivity and you have cost productivity, and you have to work on both. And I would say that's exactly what we are driving and how we drive that. Use lean tools in what Glenn said, with the 2 Glenns and we put 1 away. That's one. But it could be also when you have 10 people, okay, how you do this with 9 people. So this is lean. And on the other side is also on the chemical plants, when you look to that, it's [ OE ], it's Six Sigma, it's process capability, it yields. It's change over time and things like that. So I would say we have good opportunities, and we will, I would say, put these tools in place and then we drive the culture, so you need every employee. That's also a part. It's not that this is driven by management only. You need every employee. There's a lot of ideas. They know exactly where is the waste of time. And when we drive this culture, I'm pretty sure that I think we will achieve the numbers that we have presented.

I would also note that when I said one Glenn went away, all my colleagues perked up immediately.

Yes. And the only thing I will add on the confidence and you can see now with the team that we're assembling around this. And I've had a chance to go through many different mergers and integrations. We do have the opportunity, and I highlighted in the administrative expense line there's duplication is efforts and honestly, the things we should have probably gotten after a little bit sooner than what we have. We're very confident in the productivity numbers that we're putting forward. So I think you can see here, we believe that not only are we laser-focused on it, we'll deliver on those expectations.

Jeff?

Jeff Zekauskas from JPMorgan. Two questions, one for Frank and one for Glenn. Nicolas Mirzayantz is leaving the company. And I think, Frank, you're taking over the Nourish business, as a temporary head and it feels like the head coach is also going to be the offensive coordinator that is you're taking on 2 jobs. Why did you choose to do that rather than give it to someone in your organization? And for Glenn, in listening to your presentation, there's [ $350 million to $400 million ] productivity improvements. And it sounded like the $150 million that you wanted to invest was recurring. Is there also a nonrecurring element that ties to that $350 million to $400 million?

Yes. So maybe I'll get started with the first part of your question, Jeff, on Nicolas, one I do and acknowledge and publicly thank Nicolas for 34 great years at our company and all of what he has done help us moving forward. When we had the decision where Nicolas was leaving the company, I had a chance to really spend a lot of time and have been spending a lot of time, as you can imagine, with the Nourish leadership team. Because it's our largest division, and we've got a really strong team. And I will be spending time and actually leaning in and learning and really diving in for a period of time, Jeff. I think it will help us. I feel really confident in the leaders underneath Nicolas, the leader of our flavors business, our ingredients business and our food design business, very seasoned strong leaders. So I feel like I can help them in the near term. And then obviously, I'm thinking through options of what's now next best for the company. So that's a Nicolas question.

On your second, great question, Jeff. I meant to mention that is -- the good news is the majority of our cost reductions are basically stop doing things. It's yield improvements in digital application, demand management not spending money on the outside. However, there is some level of, obviously, headcount that's associated with it, and to some extent, some the redundancy as we build shared service and move stuff or a slight impact relative to the facilities. That's about $150 million in cash, which we expect to largely be spent over the next 2 years called that '23 and '24 to basically implement.

Maybe we'll swing back over here Jon Feeney? Got it right there.

If you go back about 12 years ago, there was a lot -- some very similar themes to what IFF management was trying to accomplish with different group of businesses at the time. And one thing that stuck out to me was the ROIC discipline inside the units at the time they talked about prioritizing the most profitable briefs, and that there had been a lot of time and energy spent on tiny things. I mean inherently, this is a creative people and customer-driven business. It's very easy to get off that ROIC track. Would you say something like that is true today just with the newly acquired business and that's part of the opportunity here?

Yes. I'll start. 12 years ago, I wasn't here, so I'll start there. But I've heard about it because people have mentioned it. I think you always want to still have -- and we have great , and we talked about our purpose around creativity and how we want to utilize creativity work with our customers. We don't want to necessarily lose that. However, we do believe we can accomplish both. We feel as though with the leadership and management team as well as the processes and systems we're going to put in place, we can really drive the type of culture that is disciplined, really looking at a return on invested capital lens market attract us, but not lose the creativity and what really differentiates us as well. So I feel as though overall, this is a good place to be. What is encouraging, probably the most encouraging aspect. Like I said, the discussions we've been having in the organization has been very encouraging because people have embraced it. They've now seen the opportunity, and that's what we're rallying the company around, which is why I speak to some of the cultural elements around one IFF, high accountability high collaboration. So I feel like we can have a little bit of best of both worlds here and execute on what we just discussed.

But there's definitely work to do to drill down that ROIC mindset to the day-to-day operation. So one of the playbooks. So we've been working with these businesses relative to the archetype and how they think about their priorities, so capital versus growth as an example. Secondarily, in our cadence is in process. So now relative to our CapEx budgets, we're thinking very discretely where the capital goes, working capital objectives as an example, relative to that tools, so costing models as it relates to RFP, making sure we bake in the right margin objectives relative to that; and finally, incentives. So as I mentioned, having P&Ls actually have a charge for cost of capital is important and making sure that people are incentivized relative to their goal. So it does take the mechanics to your point, to be embedded in terms of the organization to make sure that those actually become real.

Which is now the incentive program.

I'm going to try to sneak in 2 more if we can. Mike Sison right there.

Mike Sison, Wells Fargo. Just in terms of the high return on capital, the 30-plus percent, you don't see a lot of businesses or product lines with after-tax returns are high. So have they been that high for a long time, for a couple of years? And what keeps them so high, I guess, is the question? And I just wonder if folks see this presentation like, Oh my gosh, I need to -- I need to compete against these businesses. So I just -- maybe a little bit of color on why they're so good and how sustainable they are going forward?

Yes. Maybe why don't we [indiscernible] or anyone that has some of those businesses. Maybe you want to give a little settlement.

Thank you. Maybe I will talk about the Fine Fragrance business. As you know, it's a business that have grown high double digits since the last 2 years, but it was a very resilient business since the last 10 years. It's high margin, and we see that our customers are putting more and more value in this business. You have seen this since COVID that this business has grown in every region. There's a lot of opportunity in some new areas like China, Japan, we see the segmentation. We're going more and more and more premium even we go to luxury now. So in fact, the value of the fragrance is increasing and we benefit from this value as well. So that's one of the category that's really we continue to drive for IFF.

I think Mike, you also have to think about that we are a very small fraction of the end product and high value add. So that's part of the equation, right? So very few things we can do can add tremendous value downstream. And secondary it is a very complex business to replicate. So you just can't come off the street because of the uniqueness and formulations, proprietary technologies, intimacy with the customer, co-creation process. So to some extent, that sort of reinforces the return economics in this business.

Great. Maybe one last one. Ghansham, if you can get in the middle right here, that would be great.

Ghansham Panjabi, Baird. First of all, thanks again for hosting us here. On the last conference call, you talked about 4Q being off to a relatively slower start in terms of volume weakness. I think you mentioned destocking, certain categories are weaker. Maybe just give us an update relative to that baseline and then second, it looks like your base volume growth assumption for 2023 is 1%, second half weighted versus first half. In the scenario that volumes are more unfavorable, let's say, relative to the assumption what are some of the contingency plans you have in place to protect against margin deleveraging and also ensure that you hit your free cash flow commitments.

Yes. Maybe I'll take those. First, I will hold and Glenn kind of gave you a preliminary view of 2023, a lot of moving pieces. We're going to come back and unpack that in specific terms. As we get here in a couple of months in February when we report out. So more to come on '23. We're trying to give you an overall view with the moving pieces, but we'll come back. With regards to Q4, we do see some continued volume pressures as we've discussed. But at this point in time, we're holding to our current fourth quarter and full year guidance. If you recall, we had guided in that range of from an EBITDA perspective, $2.5 billion to $2.6 billion. we're still holding towards the bottom end of that range. So that's where it is kind of the latest as far as Q4 goes.

I would add that, as I mentioned, it is murky, the outlook. We're trying to discern what's consumer base versus customer from a destocking standpoint, as I mentioned, and we'll provide, obviously, a lot more perspective in February is that we get to the point that we feel that we want to reduce further production that is a good answer for us because that will actually make sure that we maintain our discipline on reducing inventories and cash flow. That may have a temporary impact basically on manufacturers. You made some negative absorption. So that's just a correction of the inventory. So it's sort of transitory from that standpoint. So we'll have, I hope, a lot more clarity when we talk to you in February.

Great. I think that concludes Q&A. I'll turn it back to Frank.

So I just want to, first of all, thank everyone for coming out in person. It was great to see everybody in person. So thank you for your interest in IFF as a company. I hope you walk away with the excitement and energy that our team has about the future of this great company. We are laser focused as a team and are not just this team here, but the 24,000 people around the world are now executing against the plan that you saw today. I also hope that many of you have some time pleased to join us downstairs. We're going to highlight some of what Greg was speaking about. We're very excited about the innovation that we're bringing to the market and I think, Mike, it is up and around and downstairs, but we would ask if you could please stop by. All of us will be rotating through so we can have some further discussions. But thank you for interest in the company, and we really appreciate it and we look forward to seeing you soon.