At this time, I would like to welcome everyone to the IFF Fourth Quarter and Full Year 2021 Earnings Conference Call. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. Participants will be announced by their name and Company. In order to give all participants an opportunity to ask their questions, we request a limit of one question per person. I would now like to introduce Michael DeVeau, Head of Investor Relations. You may begin.

Thank you. Good morning, good afternoon and good evening, everyone. Welcome to IFF's fourth quarter and full year 2021 conference call. Yesterday, we issued a press release announcing our fourth quarter financial results and full year 2021 financial results and outlook for 2022. A copy of the release can be found on our IR website at ir.iff.com. Please note that this call is being recorded live and will be available for replay. I ask that you take a moment to review our forward-looking statements. During the call, we'll be making forward-looking statements about the Company's performance and outlook based on the current state of the business. These statements contain elements of uncertainty, which we've laid out on Slide two of the cautionary statement. For additional information concerning the factors that can cause actual results to differ materially from our forward-looking statements, please refer to our cautionary statement and risk factors stated in our press release. Today's presentation will include non-GAAP financial measures which exclude those items that we believe affect comparability. A reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website. Please also note that we will be using combined historical results for the fourth quarter defined as three months of legacy IFF results, and three months N&B results and for the full year defined as 12 months of legacy IFF January to December and 12 months of N&B February to December in both the 2020 and 2021 periods to allow comparability in light of emerge of completion of February 01, 2021. With me on the call today is our Chairman and CEO, Andreas Fibig and our Executive Vice President and CFO, Glenn Richter. We will begin today's call with our prepared remarks and then take any questions you have at the end. I would now like to turn the call over to Andreas.

Thank you, Mike and welcome everyone. Thank you for joining us today. Before we dive into our results for the fourth quarter and full year 2021, I think it's important to acknowledge that this has been a transformational year for IFF. We continue to make tremendous progress amid the complex global operating environment. With a world-class team and an unmatched portfolio, IFF has become a global leader in high-value ingredients and solutions for the global food, beverage, home and personal care, and health and wellness markets. IFF is a significantly larger, stronger, and more diversified organization than when we began our transformation several years ago. The enhanced scale gained through our combination with N&B makes us an even more powerful innovator and trusted partner to our customers. On a personal level, I must also reflect on what has been a tremendous and highly satisfying journey leading IFF. Together, we have taken a number of strategic actions that have transformed IFF into the category-defining leader it is today, and I'm also incredibly optimistic about IFF's future. The company's leadership team going forward has the right expertise to lead IFF's next chapter of growth and excellence in execution. I and the entire IFF team are pleased that Frank Clyburn will join IFF as our Chief Executive Officer effective February 14. Frank brings extensive experience leading complex global businesses and overseeing large-scale integrations. He is approved to operate and will enhance the team's focus on execution to benefit our customers, teams, and shareholders. It has been a privilege to lead such a talented global team, and I know that with the recent appointment of both Frank and IFF will be in good hands. We also recently announced the appointment of Barry Bruno to IFF's Board of Directors as an Independent Director. Barry is a welcome addition to our board as he has significant experience leading innovative consumer brands that will benefit all IFF stakeholders as the company executes its strategic and operating priorities. Barry joins a board eight of which are new to the IFF board within the past year. That consists of proven executives with deep experience leading global organizations overseeing transformative merger integrations and executing business strategies across a diverse set of industries. On today's call, I will begin with providing an overview of IFF's full year 2021 performance and discussing the progress we have made so far on our integration. I will then turn the call over to Glenn who will provide a detailed look at our fourth quarter financial results. Before we conclude today's call with a question and answer session, then we'll also speak to our outlook for 2022. I'd like to begin on Slide six by reflecting on our strong performance for the full year 2021. IFF's financial results in 2021 reflect the strengths and durability of our extended portfolio and the exceptional dedication of our teams. Within the challenges of today's global operating environment, we delivered strong sales growth across our business divisions, including meaningful recoveries in the segments most affected by the pandemic. For the full year 2021, IFF delivered $11.7 billion in sales representing 10% growth or 8% on a currency basis consisting of very strong volume growth and modest pricing contributions. Like so many companies, persistent inflation and global supply chain challenges pressured our profitability margin. Yet, we achieved 3% growth in our combined adjusted operating EBITDA. Glenn will cover these topics in greater depth, but I want to note here that we are taking significant actions to best position the business amid the evolving macroeconomic environment, including significant pricing actions. IFF continues to operate with a very strong financial foundation, having delivered $1.04 billion in free cash flow or approximately 9% of our driven by robust cash generation. Given our strong financial position, we continue to make significant progress towards meeting our deleveraging target, having already reduced net debt to credit adjusted EBITDA to 4.1 times. We also delivered meaningful synergies in connection with our integration initiatives. Importantly, we have all performed our cost synergy targets for year one, post-close of the N&B merger, and our ongoing focus in execution positions us well to further drive synergy realization and productivity improvements. In 2021, we also made significant strides to optimize our portfolio, including the successful divestiture of our food preparations business, and the announced sale of our microbial control business, which we expect will be completed in the second quarter of 2022. Once our microbial control sale is complete, the combination of all these two transactions will generate approximately $1.4 billion in gross proceeds. Growing IFF to more rapidly deleverage the balance sheet as we continue to progress with our integration objectives, Frank and team will explore additional opportunities to optimize our portfolio, driving greater focus on the core parts of the business and enhancing shareholder values through rapid deleveraging. For IFF, 2021 was filled with exciting achievements and meaningful change that continues to propel us forward and solidify the importance of our business within the global supply chain. Our business is delivering strong growth as an indispensable partner to our customers, and while we are operating in a challenging environment, our leadership team is taking the right action to position our business for the future. We are delivering on our commitment to boldly reinvent, deliver consistent execution and transform our ability to reach and partner with more customers around the world. 2021 was a foundational year and one that I have no doubt the company will build on as it accelerates into the future. Now turning to Slide seven, I would like to walk through the regional sales dynamics underpinning our results for the full year 2021. I'm pleased to share that we saw strong growth in all four of our key operating regions. In North America, we achieved 8% growth across nearly all segments led by high single-digit growth in health and biosciences. In Asia, sales increased by 9% led by continued double-digit growth in India and China. Nourish, Scent, and Pharma Solutions all performed particularly well in Asia with strong growth and momentum throughout 2021. IFF achieved 11% growth in Latin America region with double-digit growth across nearly all countries. Our Nourish division delivered strong double-digit growth with health and bioscience and Scent businesses growing in the high single digits. Our EMEA also delivered strong sales results with 9% sales growth driven by the double-digit growth in the fine fragrance business. EMEA was also bolstered by strengths in our Nourish business, with significant growth led by food service. Moving now to Slide eight, I would like to discuss our sales performance across IFF business segments that contributed to our overall storm growth for the year. For the full year, Nourish achieved currency-neutral sales growth of 9%, broad-based strengths in our flavors, ingredients, and food design businesses. Health and Biosciences delivered 6% currency neutral growth in 2021, primarily driven by strong performance in home and personal care, animal attrition, culture, and food enzymes. Scent also delivered strong 8% currency-neutral growth led by fine fragrance, consumer fragrance and ingredients. Pharma Solutions achieved 2% currency-neutral growth driven by demand in our industrial business, while we continue to see headwinds related to ongoing limited material availability and logistical constraints. Now on Slide nine, I would like to focus on the underlying dynamics driving segment performance. For Nourish, consistent strong performance included double-digit growth in ingredients while our margins were impacted by our costs of raw materials. Adjusted operating EBITDA increased 8% from strong volume growth, pricing actions, and a continued focus on cost management. In Health and Bioscience, strong growth in home and personal care processing and cultures and food enzymes were key drivers. Higher costs for raw materials and logistics remain a challenge, which adjusted operating EBITDA margin of 26.8% in the segment. Our Scent division benefited from a strong rebound from last year in fine fragrances. In addition to continued solar performance in consumer fragrances and double-digit growth across cosmetic actives. Adjusted operating EBITDA grew 11% as margin expanded 30 basis points led by volume growth, favorable mix, and higher productivity. Finally, in Pharma Solutions, we saw significant customer demand and double-digit growth in the segment's industrial business. Global supply chain issues, however, remained an overhang for 2021 margin performance. Moving now to Slide 10, I'm very pleased to share that our full year sales result exceeded pre-COVID levels, which is particularly encouraging for the year ahead. As previously outlined, sales growth was consistent across our business segments, reflecting the strengths and resilience of our extended portfolio and IFF's position as an essential partner for customers in critical industries around the world. It is clear that IFF continues to deliver enhanced value to our customers as a result of our merger with N&B and the work we are doing to strategically integrate our businesses and focus on execution. Simply put, we are a stronger business today, and our customers recognize the unique value we bring as a trusted innovation partner. Let's move to Slide 11. I would like to reiterate our strong progress to deliver synergies in connection with the N&B combination. In 2021, we exceeded our year-one target of $45 million to deliver approximately $60 million in cost savings. This includes approximately $20 million in savings in the fourth quarter. Revenue synergies also were a modest contribution to top line performance, with a projected pipeline continuing to develop. Execution and operating discipline remain the top priority for our leadership team, and I'm pleased to see results that reflect this commitment. With that, I'd like to turn the call over to Glenn.

Thank you, Andreas and welcome everyone. Thank you again for being with us today. As Andreas highlighted, 2021 was a strong year for sales growth, including a strong fourth quarter finish. Looking more closely at our consolidated fourth quarter results, IFF generated greater than $3 billion in sales representing a 10% year-over-year increase on a currency mutual basis, our third consecutive quarter of double-digit growth, primarily driven by double-digit growth in our Health and Biosciences division, as well as high single-digit growth across our Nourish, Scent, and Pharma divisions. As with our full year results, our fourth quarter margin performance continued to face inflationary pressures, much like our entire industry, which offset positive volume growth, solid price increases, and the benefits of synergies and productivity. Early in the fourth quarter, we recognized a significant escalation in inflationary pressures, and as a result, we quickly mobilized to prepare to implement significant pricing actions across all businesses to protect overall profitability. I will discuss these actions, as well as our efforts to accelerate productivity and operational excellence when I discuss our 2022 outlook. On the next several slides, I will briefly dive deeper into the fourth quarter financials of each of our core business segments. Turning to Slide 13, I'll begin with our Nourish segment, which experienced both a solid quarter and overall performance in 2021. In the fourth quarter, Nourish achieved 9% year-over-year sales growth on a currency-neutral basis, driven by strong volume growth and price increases. Our Flavors business, in particular, realized strong growth with increased sales across all regions. Ingredients grew by strong double digits due to increasing customer demand, and both food design and food service also drove growth for Nourish in the fourth quarter. Adjusted operating EBITDA declined slightly due to inflationary pressures. Pressure on profitability occurred despite strong volume growth, increased productivity, and strategic price increases in the segment. On Slide 14, our Health and Biosciences division delivered fourth quarter year-over-year sales growth of 13% on a currency-neutral basis led by double-digit growth in health, microbial control, animal nutrition, and grain processing. Additionally, cultures and food enzymes and home and personal care each grew at high single digits against strong year-over-year comparisons. Our adjusted operating EBITDA increased 4% due to volume growth and higher productivity, while margins faced pressure due to inflation and higher logistics costs. Turning now to Slide 15, our Scent division continued to perform well and achieved strong growth in the fourth quarter, delivering 6% year-over-year growth or 7% growth on a currency-neutral basis. This performance was supported by a continued rebound in fine fragrances, which saw double-digit growth driven by new wins and increased volume. Our Consumer Fragrances category delivered single-digit growth against a strong high single-digit year-ago comparison. The ingredients business continues to contribute to the success of the overall segment with double-digit growth in fragrance ingredients. Despite solid volume growth and favorable mix in the business, Scent adjusted operating EBITDA growth was affected by higher costs of raw materials, which we continue to take action to mitigate. On Slide 16, our Performance Solutions segment delivered year-over-year currency-neutral sales growth of 9% from 2020 as a result of volume strength and price increases. Both our core pharma and industrial categories contributed to our strong performance in the quarter. Performance Solutions adjusted operating EBITDA and margin was also impacted by higher raw material and energy costs. We recognize the challenges the segment is experiencing due to the current market environment and macro supply chain constraints, and are optimistic that as the global situation recovers, we will recognize the full potential of Pharma Solutions. Now on Slide 17, I would like to review our cash flow position and progress in deleveraging. For the full year 2021, we delivered strong cash of over $1 billion and are on track to meet our deleveraging goals. In 2021, CapEx was $393 million or approximately 3.4% of sales as we made strategic investments in the most attractive segments of our portfolio. Overall, our capital expenditures were lower than originally planned in part due to slower implementation of projects caused by some vendor delays and the continued effects of the COVID environment. We also paid out $667 million in dividends to our shareholders in 2021. From a leverage perspective, we continued to make substantial progress toward achieving our deleveraging target, finishing 2021 with $4.1 net debt to credit adjusted EBITDA ratio. IFF reduced gross debt by $124 million to $11.4 billion versus Q3, and we finished 2021 with cash and cash equivalents of $716 million. We remain confident that IFF is on track to achieve our deleveraging target of three times net debt to credit adjusted EBITDA by year three post-close, further supported by additional divestitures that I will touch on in a moment. Turning to Slide 18, I'd like to provide commentary on our business outlook for 2022. For fiscal year 2022, we expect revenue between $12.3 billion and $12.7 billion with adjusted operating EBITDA in the range of $2.5 billion to $2.6 billion. We are also forecasting foreign exchange rates will be a headwind in 2022, approximately a two percentage point headwind to our revenue and a four percentage point headwind to adjusted operating EBITDA in '22. As you are all well aware, we continue to operate in a complex market environment with ongoing uncertainties from the pandemic, global political tensions, and supply chain challenges. IFF, and our industry at large, have been impacted by these issues, and we expect and have planned for that these challenges will remain into 2022. As I shared on our third quarter call, we expect inflationary pressures to be significant in 2022, as we see large cost increases in raw materials, energy, and logistics. As a result, we are taking significant pricing actions to fully offset our dollar cost exposure, which we expect will result in strong sales and profit growth, but will depress margin. Longer term, we remain confident in our ability to recover margins to pre-inflation levels as we are focused on improving returns to generate strong value creation for our shareholders. We also remain intently focused on driving cost reductions through synergies and increased productivity efforts throughout our business. In addition, we are increasing CapEx in 2022 to approximately 5% of sales as a result of '21 CapEx carryover and increased investments to facilitate expansion in key technologies, which will help support growth while also lowering logistics costs. Finally, we will also be increasing inventory by approximately $300 million to more appropriate levels to ensure we can continue to serve our customers.

Now moving to Slide 19, I would like to focus more specifically on the cost inflation trends that we saw in '21 and now forecast to see in '22. Heading into 2022, we expect certain costs, including raw materials, energy, and logistics will continue to rise much as they did in '21. Overall, we expect '22 cost increases to be double digits, approximately 10%. We are seeing most of these increases related to inflation in raw materials with double-digit increases in oils, cellulose, pulp, turpentine, aroma chemicals, petrochemicals, fragrance specialty chemicals, savory ingredients, specialty chemicals, agriculture, grains, and sweeteners. The inflationary pressures manifest themselves differently between the legacy N&B and IFF businesses. Most of the higher energy and logistics costs in '22 are related to legacy N&B. With added capacity coming online later this year, we hope to start to mitigate some of the logistics headwinds we have been facing due to an imbalance in supply and demand. If you look at the legacy IFF portfolio, we are seeing high single-digit raw material inflation similar to our flavor and fragrance peers. Recognizing these challenges, we have been aggressively pursuing broad-based pricing actions and accelerating synergy and productivity efforts. Turning to Slide 20, I will provide more insight into our sales guidance for 2022. Our $12.3 billion to $12.7 billion sales expectation represents continued momentum on top of our strong 2021 results. To get to a more comparable revenue basis, you must add back approximately $500 million of sales related to N&B in January of 2021, as N&B results were not part of IFF until February 01, 2021. Our sales guidance also accounts for the removal of June to December '21 revenue results following the anticipated completed sale of our microbial control business, as well as the first nine months of '21 sales for our fruit prep divestiture which we closed in October of last year. That gets you to our comparable '21 revenue base of $11.85 billion as indicated on the slide. As I said earlier, we are significantly increasing our prices in order to fully offset the dollar cost exposure of our inflation for 2022. With that in mind, we anticipate pricing to be a significantly larger contributor to the top line in '22. This pricing impact, plus more months of volume growth following a strong '21, will be central to our overall sales performance in '22, where we expect to grow approximately 6% to 9% year-over-year on a comparable currency-neutral basis. Now, in terms of our guidance on the adjusted operating front, we also had to make adjustments for comparability. If you add the EBITDA related to N&B general results and subtract the EBITDA related to seven months of EBITDA as a result of the anticipated divestiture of our microbial control business, as well as the EBITDA related to the fruit prep business for the first nine months of '21, you get to a comparable '21 base of approximately $2.5 billion. As mentioned, implementing broad-based pricing actions to offset inflationary pressures is critical to our '22 plan. Over the last three plus months, each of our businesses has executed pricing actions across essentially our entire customer base. As a result, we anticipate to completely offset projected '22 inflation pressures with pricing actions. The majority of these actions will be implemented in the first and second quarter. I would also note that we anticipate that 2023 will benefit from an additional $200 million of net pricing benefit due to the full annualization of our pricing actions, which will be equal to a 100% capture of the combined 2021 and 2022 inflation impact on our business. Importantly, we also continue to closely monitor the global supply chain environment and will be prepared to execute additional price actions as appropriate. By adding anticipated volume leverage plus synergies and productivity, we expect comparable EBITDA growth in '22 to be strong, up approximately 4% to 8%. It should be noted that the synergy and productivity contribution here is a net number where it is a combination of the benefits of synergy and productivity, net of cost of living increases and reinvestments in the business. Our guidance implies that our adjusted operating EBITDA margin will be down modestly versus '21, principally due to our net dollar cost recovery, which equates to approximately 100 basis points. Over the course of '21 and '22, we will see more than $1 billion of total inflation, and while we are working rapidly to cover the price increases, it has impacted margins significantly. To give you a perspective of the magnitude, our margin for the full year '22 on an inflation-adjusted basis will be approximately 300 basis points higher or approximately 23.5%. In terms of the marching cadence throughout '22, we expect the first half to be down year-over-year with expansion coming in the second half. While sales are expected to be strong in the first quarter, year-over-year adjusted operating EBITDA margin performance will be the most challenged of the year, down over 300 basis points versus our reported first-quarter 2021 margin with each quarter after that concluding. Much of this will be driven by price to total inflation, where we expect to turn positive starting the third quarter. As I conclude, I want to highlight our four key areas of focus for '22 and provide further color into our detailed execution plans for each. First, we are committed to building on our strong '21 sales momentum. Our 6% to 9% targeted '22 currency-neutral sales growth anticipates that we will continue to maintain volume growth consistent with overall industry growth rates. We believe that our exceptional R&D pipeline and scaled global commercial teams, including targeted '22 investments, will allow us to continue to deliver superior customer solutions and support strong growth. In addition, as I mentioned previously, we are making substantial investments to increase capacity across constrained portions of our portfolio and enhancing supply chain efficiencies. Lastly, we'll be sharpening our focus on our revenue synergy opportunities as we are behind our original planned pace, as much of last year was focused on addressing near-term supply chain issues. That said, we are confident that the breadth and depth of our platform will allow us to build meaningful revenue synergies over time. Second, as previously outlined, we are intently focused on broad-based pricing actions to offset inflation. And importantly, as the macro environment evolves, we are prepared to quickly execute additional pricing actions throughout the year as needed. To enhance our ability to react more quickly to the dynamic environment over the last several months, we have undertaken a comprehensive end-to-end review of our procurement processes, implemented new pricing tools, and established core pricing teams for each one of our businesses. Our focus has been to compress the time between inflation signals and customer pricing actions, ensuring we optimize product segment and customer-specific pricing actions and closely monitor the level and pace of pricing utilization. Going forward, we are focused on further enhancing our procurement processes and pricing programs. Third, we are determined to accelerate our synergy realization and more broadly our productivity efforts in 2022. For your reference, included in our '22 guidance, we are targeting approximately $200 million of cost reductions from synergies, yield enhancements and reformulations, logistic efficiencies, and other operational improvements. Net of wage inflationary pressures and targeted investments to help drive top-line growth, we are targeting net cost efficiencies of approximately $100 million for the year. While we feel this is good progress, we also recognize that there is more work to do. Consequently, in addition to the end-to-end review of procurement, we are undertaking a comprehensive review of our global manufacturing and logistics platform, constructing a plan to accelerate the scope and scale of our global shared service capabilities, and developing a detailed technology and digital integrated roadmap, all with the goal of driving meaningful efficiencies, while also ensuring we provide superior customer solutions and service. Fourth, we are actively working to accelerate our non-core divestitures. As we have discussed, we are on track to successfully complete the sale of our Microbial Control business, which will enhance the efficiency and profitability of our portfolio. We're also targeting additional portfolio optimization to further deliver our balance sheet and focus on core growth opportunities. Over the coming quarters, we will proceed with marketing a handful of non-strategic businesses, call it three or four, where we believe that over the next 18 months, we can generate expected proceeds of approximately $1.5 billion to $1.7 billion. Similar to our fruit prep and Microbial Control business, these are non-strategic, and the transactions will be accretive to our go-forward growth rate and margin profile. With this action plan together with our current sales momentum and strength, our leading portfolio, I am confident that IFF will deliver strong results in 2022. With that, I would like to turn the call back to Andreas. Thank you, Glenn. IFF's transformation has been deeply personal to me, and I know that this company is stronger today than it has ever been. I am proud of the solid year we had in 2021 with significant year-over-year sales and profit growth, as well as steady progress towards our integration with N&B. So all my time at IFF, I've been consistently impressed by the thousands of employees who have dedicated their time and talent to make our company the category-defining leader it is today. I want to thank them for their contributions over this year and the time I have led the company and also for that passion about IFF and the commitment to our customers. The path ahead for the company and its new leadership team is clear. I'm confident that IFF enters its next chapter with the right team, a best-in-class portfolio, an innovative spirit, significant financial flexibility, and a unified sense of purpose to drive long-term growth and benefit our shareholders, employees, customers, and communities. With that, I would now like to open the call for questions. Thank you.

And we will take our first question from Gunther Zechmann with Bernstein. Your line is now open.

Hi. Good morning everyone. Hi, Andreas. Hi Glenn, thanks for taking my question. Can I start with two? The first one is on the top line guidance for the year. Can you just outline to us what's required to get to the higher or the lower end of the range respectively please? And the second one is you're pushing through quite a lot of price increases already ahead of some of your key peers in F&F. What's the volume elasticity that you expect or have already seen on the price increases and what you hear from your customers in that regard please?

Yeah. Good morning, Gunther. Thanks for the question. Your two questions are highly related because relative to the top line, we'd say the variable that's likely to be the bigger indicator of the range is we're going to be more volume than price. If anything, frankly, we feel very good about what we've implemented from price what's coming through. If there's additional inflationary price pressures, we may in fact push additional pricing, but volume to some extent, I think is the bigger question mark for us. We had a 2% to 3% assumption relative to volumes. That's probably a point lower than historically the market from a standpoint, and that will probably drive the difference in terms of the top line. To your second question, we actually have not seen much elasticity. i.e. as you know, yourself sort of amp up on the consumer product companies have been releasing recently, those volumes generally have been sticking in the market. We have one month, by the way, the month of January results, generally volumes are sort of holding up in their Q4. So we're not seeing sort of a drop yet. That being said, when we put the plan together recognizing this is going to be a very abnormal year, given the sheer degree of pricing, we got it prudent to plan accordingly and we actually expect, and what we've seen from an awful lot of our competitors is everybody is basically implementing the same range of pricing in the market.

And we will take our next question from Mark Astrachan with Stifel. Your line is now open.

Yeah. Thanks and morning, everyone. Wanted to follow up sort of related to the last question, so in the '22 guidance, I guess both top line and adjusted EBITDA expectations is really strongly predicated on this pricing. So how do you think about this in kind of broader, longer term strokes? If you go back years ago, competitors or ebbed and flowed in terms of the ability to take price and how quickly they took price and how much they took price. So how do you think about how your competitors react? If you go back through those earnings calls, nobody's really talking about specifics, but you just laid out specifics. So how do you think about or what's embedded in what your competitors are going to do from a pricing standpoint and how quickly can you adapt if your competitors don't directly follow how much you're taking at this point and just a related point, how do we think about it beyond '22 in terms of how much pricing is given back versus what you're taking this year?

Sure. Great question, Mark. The reality is we're well into midstream on pricing actions. We signaled in our third-quarter call with heavy inflation on the horizon; we reacted very quickly. So we spent the latter part of the fourth quarter and then on sort of every working day this year executing broad-based pricing across the entire customer base. That actually has been quite effective. So based on the read of that, i.e., we've implemented most of that pricing already, which will kick in largely over the first and second quarter. It appears to be sticking. We also know from observing our competitors, as they're under similar inflationary pressures; we're all sort of seeing the same thing and they're also passing pricing through. So we feel like we're sort of neck-to-neck in terms of what we're doing in the market. We are being surgical. There are certain categories that are slightly more elastic or price competitive, if you will, and are being thoughtful about sort of where we price, and there are other areas that typically are less elastic. They also are passing pricing through. So we feel like we're sort of neck-to-neck in terms of what we're doing in the market.

And we'll take our next question from Mike DeStefano with Wells Fargo. Your line is now open.

Good morning. It's been a great end of the year, and working with you, Andreas, has been wonderful. My question is about your progress towards top-line growth goals for 2023. It seems ambitious to reach over $3 billion by the end of the year, especially if you're also aiming for 2025 and 2026. Do you believe achieving the EBITDA goal for 2023 is still feasible, or might it be pushed to the following year? I understand that obtaining $200 million in pricing next year would significantly help. Could you explain how 2023 aligns with your original plans for the deal? Thank you.

I think the question really pertains to how we approach our long-term goals. Frank will be joining us next week, and we plan to work diligently in the coming months to reassess our long-term targets. I would say, as we look ahead to '25, '26, aiming for '32, '33 presents a significant target for next year. As you mentioned, we see a clear path to $200 million in additional pricing, along with at least another $100 million from synergy productivity. Honestly, I hope for even more than that, but we still have $100 million of synergy potential that can bring us closer to the $28 to $29 range. We're narrowing the gap, but there is still work to do. I remain optimistic qualitatively about this year, despite the challenging operating environment we've faced, including inflation and global supply chain issues. Nonetheless, we believe the strength of our platform offers substantial revenue growth opportunities. The more time I spend here, the more I realize there are significant chances to improve our overall productivity and operating margin. Until Frank arrives and we go through a detailed assessment, we can't provide a specific number. However, there is a clear pathway to achieving around $28 or $29 next year, based on pricing and productivity, with additional opportunities beyond that.

And we'll take our next question from John Roberts with UBS. Your line is now open.

Thank you and best wishes Andreas. You're guiding to a 4% headwind from current FX rates to EBITDA in 2022 and that's more than the 2% impact on sales. This is our first time going through an FX headwind with the new portfolio. So maybe help us with how much your costs are in dollars relative to the revenues and foreign currencies. And your side of the Euro continues to be the key currency, but has the overall basket of important currencies changed with the new portfolio?

The basket has changed actually with the combination of N&B. It's actually slightly more U.S.-based than it is non-U.S.-based. Roughly around 50% of our revenues are U.S. dollar-denominated, about 25% are Euro, and then a range of currencies for the residual from an earnings perspective while the Euro's 25% in revenues. It's about 20% in terms of our earnings. From a cash flow standpoint, because we have a higher cost base that is European-denominated. So, it is a significant portion. It's the one, that's what we focused on from a risk standpoint. As you know, the Euro dropped from circle 118 on average last year; it's been in sort of the 113, 114 range. We were planning at 113, so that's how we sort of think about the year.

And we'll take our next question from Adam Samuelson with Goldman Sachs. Your line is now open.

Hi. Yes. Thank you. Good morning, everyone. I would like to delve a bit deeper into the cost energy capture and the assumptions included in the 2022 guidance. Specifically, I'm interested in understanding what remains to be captured after 2022 and how that relates to our discussions on the pricing carryover in relation to the original N&B merger plan and the margin EBITDA potential for 2023.

Sure. Thanks for the question, Adam. As a reminder, we have realized $60.21 million in synergies. Our goal was to reach $180 million this year and eventually increase that to $300 million, but we will fall short of that target. This year, we will report an additional $90 million. It's important to note that our overall productivity target is $200 million, so we are considering a broader scope beyond just synergies, especially now that we are a year past the merger. We need to find ways to reduce costs across the entire company instead of just focusing on specific areas resulting from the merger. The shortfall we’re experiencing this year is primarily in procurement due to the challenges in the global supply chain, which made it unrealistic to expect substantial synergy impacts. Adding $60 million to the $90 million brings us to about $150 million. I am confident that we will realize the remaining $150 million in synergies across other areas and will continue to prioritize productivity beyond that. Looking ahead to next year, when considering pricing effects of $200 million and the additional $150 million, that will inform our projections of 28 or 29 as we carry over into '23.

And we'll take our next question from Jeff Zekauskas with JPMorgan, your line now open.

Thanks very much. You generated $1.4 billion in cash flow on an EBITDA of $2.4 billion, which is just under 60%. Do you expect this ratio to hold for 2022, meaning your operating cash flow will be around 1.5, or do you believe there is potential for improvement? What should be the typical ratio of operating cash flow to EBITDA?

Yeah. it's a great question. We have some more work to do to figure out sort of where we're going to be longer-term relative to cash generation. We're going to be actually making slightly higher investments in two areas this year. I think net of these investments will be sort of about equal on a cash flow basis. One is we're going to be adding inventories building, I should say, inventories of about $300 million. As a reminder, when the deal was closed a year ago, we were at artificially low inventory levels, about 111 days. This historically, the combined entity was in the 125 range. We built some of that back at the end of the year, but we're still sort of short of where we need to be. The second thing is our CapEx spending will increase this year as well relative to last year. Those increases are twofold. We ended the year less than $400 million. Some of the CapEx we were unable to implement last year that was a by-product of suppliers basically being delayed in terms of supplying steel and other products. And in addition, just we operate in COVID environment. So the speed at which we're able to implement the load as well. So we're ramping up. We're also ramping up simply to address some capacity constraints in supply chain, which will actually help to achieve higher demand levels as well as lower costs on the logistics side. So net, there is about a combination of $500 million increase between inventories and higher CapEx year-over-year, but the overall cash flow apart from the business would be felt relatively neutral after that's done. Longer term, as I mentioned previously, we really have some work to do to think about our longer-term goals relative to the cash generation of the enterprise.

And we'll take our next question for Lauren Lieberman with Barclays. Your line is now open.

Great, thanks. So I know you commented on there being in that residual $200 million benefit on pricing when we get into 2023, but I did think it was worth just referencing the fact that some of your competitors talk about it taking 18 to 24 months for inflation to be covered with pricing. So I'm just curious why that would be such a shorter timeframe for you. So that's kind of point one, and point two is just, I think the N&B businesses, there are components of them. My understanding is there are a little bit more commodity in nature where switching costs would be low for your customers versus more, and there's certainly plenty. It's very value-added, and that's not true at all. But just any thoughts or the degree you have visibility on elasticity for those portions of the portfolio? I don’t know how, what your data was like at N&B and so on, if there's visibility into some history on that piece of business as well that's informing your elasticity thoughts for this year? Thanks.

Sure. Thanks. Thanks for the question. In general, as I mentioned, we haven't seen much of volume drop off relative to our pricing action. So there are certain categories that are slightly more competitive, but in the environment where demand is still relatively high, we've been able to push through pricing. So there's nowhere have we seen sort of great pockets of softness across any of the businesses. That's point one. Point two, there is a lag, and that's why there, the $200 million will kick in late this year and roll into next year from an overlap standpoint in regard to two reasons for that; that there's contractual relationships that despite actually in this environment, it's been easier to open up renegotiations to the level of inflation. It takes time to renegotiate and put it in place. So just a timing element and then some of the contracts are more indices-based or tied to certain indexes that certified as well. So recall we had $400 million last year, so we're basically implementing all that. And then we have another $600 million to catch up. So at that billion, we will catch up $800 million of it within literally sort of five. And then we will kick into the residual into '23, which is right in that same window, sort of 18 months thinking that sort of for implementation.

And we'll take our next question from David Butler with Deutsche Bank. Your line is now open.

Thank you. Good morning. Going back to the volume guidance this year, 2% or 3%, it seems a little bit low given you are gaining share. You might have some beginnings of initial revenue synergies. Is there anything limiting that line growth assumption for this year that you can point out? Thank you.

I think we have been appropriately prudent in our planning process, given the sheer level of pricing that we have in the plan. We didn't want to sort of push the envelope if you will, from a volume standpoint. As I mentioned previously, it's going to depend upon the consumer certainly in the very, very early days of the year. That seems to be holding up. But we have a lot of year ahead of us as well. From a capacity standpoint, as we've mentioned in the past, we are making very meaningful investments, a combination of CapEx, as well as inventory, to allow us to address some of the legacy issues we had last year. Those issues were principally and legacy N&B businesses that will feel better about having the capacity to meet and if it continues. But it's largely a function of just being prudent in this sort of a very, very unprecedented market from the planning standpoint.

And we will take our next question from Ghansham Panjabi with Baird. Your line is now open.

Okay. Thanks. Good morning, everybody. Congrats again. And Andreas, I guess maybe a follow up to the last question in terms of your characterization of channel inventories, if you can you know, I'm looking at two subcategories on slide 9: ingredients and fine fragrance has obviously had a very, very big year. Are you assuming some sort of mean version as the year unfolds just from a demand standpoint as channel inventory comp against pretty healthy comps from 2021? And then also, I'm sorry if I missed this, but did you break-up the sequencing go inflation in terms of what you're assuming the inflation trajectory as a year unfolds? I know you made comments on one queue.

Yeah, let me I'll answer the second question really, just to give you some perspective on margin, sort of the margin change year-over-year progression through the year. So that reflects sort of the combination of the inflation and the pricing action, interestingly enough because we've been in two years of COVID it’s difficult to look at any of the businesses on a given quarter and it's better to look on a two-year or normalized basis. And when you do that, actually the range relative to the currency-neutral results of our businesses actually tightened up quite a bit. And they come very close together. So as it relates to this year from our planning standpoint, we don't have big differences planned per se across our different business units. There much tighter distribution in volume in part because we have a two to 3% volume in general. And in part because we think we're opinion more normalized environment, and some of the capacity issues are also being effectively addressed. So we don't expect to have a wide range of impact. A wide range of differences between the businesses as relates to volumes from a pro on the pricing actions and the inflation and how we're offsetting that we do expect that the first half principally the first quarter will be the most challenged. We expect that the first quarter is likely to have margin down year-over-year, a little over 300 basis points. We expect that that will soften to around 150ish in the second quarter. And then in the back half of the year, we'll basically be up to get to the full year. The full year guidance is sort of directionally down 80 basis points year-over-year from a combination. So that basically is a reflection of how we see the sort of the pricing kicking in relative to the inflation.

And we'll take our next question from Chris Parkinson with Mizuho Securities. Your line is now open.

Great. Thank you so much. So when I look across your portfolio, pretty solid results in Nourish, Scent, etc. Do you kind of take a step back and look at the portfolio? Can you just comment on two things? The first, just where you feel incrementally more positive on the potential for revenue synergies then also just any further color on port smaller portfolio printing? Thank you so much.

Good question. Andreas may elaborate on revenue synergies. We are optimistic about the long-term potential for these synergies, although we acknowledge that we are not on track with our initial timeline. This delay is primarily due to last year's focus on immediate challenges related to supply chain and inflation. As a result, our resources were directed more toward current issues, which has allowed our commercial and R&D teams to collaborate more effectively. We believe this collaboration has created a strong pipeline of opportunities ahead. Most of these opportunities will arise within our two divisions, as the nature of our products and customers align well. For instance, our plant-based protein offerings can provide comprehensive solutions for clients. Additionally, during a recent meeting at the American Cleaning Institute Congress, it was clear that our enzyme business for household care and fragrance products complement each other significantly. These represent some of our greatest opportunities moving forward. It's also important to note that we have research and development prospects as well. A specific example is the demand for capsules that hold fragrance in detergents, where we are advancing towards greener options. With our improved capabilities, we have numerous projects in progress to deliver effective solutions, with several already in later development stages. This represents a synergy within R&D that may take a bit more time to realize. Glenn, please share your insights on the portfolio.

Yeah, a great question on portfolio, as I mentioned in my comments, and I think we've done a very, very good job of being thoughtful about non-core businesses. Non-core those that basically are sort of diluted for our top line and bottom line, and just simply strategically don't have a great fit. As you know, we have sold fruit prep. We will be closing the second quarter on microbial controls. That's basically $1.4 billion gross. We have three or four other businesses that are being teed up. We will be going to market in the coming months quarters. We fully anticipate to have them executed. I need transactions close in the cash in within 18 months. We think that range is $1.5 billion to $1.7 billion relative to the three to four entities, and very importantly, our goal is to use those proceeds to get us to the three times or lower leverage ratio. So that actually been working very well; we had a dedicated set of teams to do nothing, but sort of focus on that to get that done. Markets have been good in relative to interest in certain properties. So we're very encouraged by that.

And we have no further questions on the line at this time. I will turn the program back over to Andreas Fibig for any additional or closing remarks.

Yeah. Thank you very much for the participation and, and the good questions and taking preparation. That's my last IFF meeting here. Thank you for all the good and constructive work and have a good day. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.