International Flavors & Fragrances (IFF)

Formulation-Led Growth in Transition

IFF's reported sales shrank while its business grew, and the gap is divestitures. The company sells flavours, fragrances and food and health ingredients that other manufacturers build into their products, and prices them on performance. In FY2025 reported net sales fell 5% to $10.89B. Divestitures took 7 points off that figure; IFF adds them back to get comparable sales growth of +2%, and currency made no difference.

IFF's growth measure is comparable currency-neutral (CCN) sales: growth excluding divested businesses and currency moves. It does not use the label "organic" and files no price and volume split, so do not invent one.

Gross margin was 36.2%, up from 35.9%. Adjusted operating EBITDA margin was 19.2%, flat on a reported basis and, on management's figures, up 100 bps on a comparable currency-neutral basis. The specialty versus commodity guide defines specialty by switching costs and a small share of the customer's cost, and IFF fits that profile even while divestitures shrink its reported sales.

How the Numbers Read

Without a price line, gross margin is the main evidence that IFF passes its costs on. It rose 30 bps, the same as Sherwin-Williams'. Formulators' gross margins rarely move 100 bps in a year, so this is stable. The adjusted operating EBITDA margin sits close to the 18.01% Damodaran reports for US specialty chemicals as a whole (Jan 2026) and to PPG's adjusted 17.3%.

Net debt at the end of FY2025 was 2.59 times credit-adjusted EBITDA, the EBITDA defined in its credit agreement ($5.436B of net debt on $2.100B). That is the highest of the six groups covered here, though each defines the ratio its own way (Sherwin-Williams 2.4x, Albemarle 2.0x, Ecolab 2.0x, PPG 1.9x, DuPont 1.5x derived).

IFF's gross margin sits between DuPont's derived 34.5% and the coatings companies above 41%, while DuPont converts more of its gross profit into EBITDA (23.8%). The ROIC guide shows how to build a company's return on capital and gives the industry figures to compare it with.

Valuation Framework

For a company being reshaped this fast, CCN growth and margin stability measure the business that remains; a model built on reported sales would read the divestitures as decline. The premium valuation guide explains why sector EV/EBITDA on normalised earnings is steadier than trailing P/E, which loss-making companies distort.

Compare Ecolab, whose filed bridge the pricing power guide uses, and Albemarle, whose prices follow a commodity market instead.

What to Watch in the Financials

CCN against reported sales. Reconcile the reported, divestiture, currency and CCN lines in each earnings release.

Labels. Call the growth figure comparable currency-neutral, not organic, and the EBITDA margin adjusted operating EBITDA. Compare the leverage ratio only with ratios on a credit-adjusted basis, or label the difference.

Key Risks

Portfolio change. With its FY2025 results (February 2026) IFF said it had launched a sale process for its Food Ingredients segment. The timing of each deal moves the top line regardless of demand.

Leverage. From the highest starting ratio, a given fall in EBITDA lifts IFF's leverage more than PPG's or DuPont's.

Consumer end markets. Flavours and fragrances depend on food and consumer-goods demand. With no price and volume split, a volume slowdown shows only in the gross margin trend and segment commentary.