The first question comes from the line of Abigail Eberts with Wells Fargo.

Looking at the Food Ingredients divestiture, it looks like you should have enough cash to do all the improvements you highlighted for your balance sheet. Is this the last deal we should expect to see for a while? Or are there other areas of the portfolio that you're looking to trim?

Thanks for the question, Abigail. This is Erik. I'll respond. First of all, I'm very proud of how our IFF team has been doing great work over the last 2.5 years to strengthen our balance sheet and get us on track to be a focused company with 3 great high-innovation businesses, Scent, Taste and Health & Biosciences. So we are exactly where we want to be with our portfolio with no significant divestitures left to do. Now it's all about scaling organically and through bolt-ons, these 3 terrific businesses.

The next question comes from the line of Kristen Owen with Oppenheimer.

Just wanted to follow up on the guidance. It looks like you brought the low end of the underlying sales growth range up. Can you just help us understand how much of that was a pass-through on the first half performance? Or is there any improvement assumed in that second half?

Great. Thanks, Kristen. I appreciate the question. Just maybe some context. Just for the first half of the year, sales were up 4% and EBITDA was up 8% for the continuing ops business. This is a good strong start. Our guidance for the full year, the range is 2% to 4% for sales and 4% to 8% for EBITDA. So the implied is 0% to 4% for the second half on sales and 4% to 8% on EBITDA. The increase in the low end of the range to your question was really the -- essentially the flow-through of the strong first half performance. And as we think about the second half growth from a top line standpoint, we do expect it to moderate from the 6% we reported in Q2, but we do believe we can deliver low single-digit growth in the second half of the year. As a reference point, I said it in my prepared remarks, but we started the quarter well, and it's kind of in line with this trajectory. But I do understand that the range is wide. But similar to how we've communicated previously, there is market uncertainty. But -- so it's not an indication of what we are seeing. The growth for the core business remains solid, but we're just being prudent to ensure we're managing the business appropriately going forward.

The next question is from the line of Ghansham Panjabi with Baird.

Just as a follow-up to the last question. Obviously, volumes were quite solid during 2Q and actually the first half of the year across all 3 of your core operating segments. But as you sort of engage with customers and they have to basically navigate another inflationary pulse for the consumer, just given the increase in inflationary costs, et cetera, have you sensed any sort of change as it relates to their view on how underlying volumes will progress as they cycle through the rest of the year and the back half?

Thanks for the question, Ghansham. I would say, first of all, consumer demand has been resilient so far this year, as we all know. And that's despite uncertainties, inflationary pressures, just a lot of complexity. So far, we do not see signs of that changing yet, and we're not really hearing from customers any significant changes. But we know there are risks, and we are focused on working with our customers to bring leading innovation so that we can grow the business as best we can in any situation. And so while things have been resilient so far, we recognize that, that could change, and we're doing what we can to do the best we can with what we control.

The next question is from the line of David Begleiter with Deutsche Bank.

Erik, in Fragrance Ingredients, how much of the double-digit growth was driven by an easy comparison versus underlying market improvement? And what's your expectation for further recovery in this business in terms of volumes post end to the Middle East conflict?

Thanks for the question, David. I'll let Mike take this one.

Yes, that's perfect. Thanks, Erik. The Scent team delivered a great Q2. Sales were up 8%. A key driver of this, to your point, David, was the Fragrance Ingredients business, which grew north of 20%. Part of this, to your point, was that we were comparing to a down 10% or more in the year ago period. So part of it is that year-over-year delta. But part of it is really the team strategically leveraged the synthetics portfolio to capture more sales due to the macroeconomic environment, including some of the supply chain disruptions and higher Brent crude prices. So they really use this as an opportunity to capture some sales. As things will settle down, we do expect it will normalize, and it's included in our forecast for the second half of the year, meaning growth in Fragrance Ingredients will shift back towards the higher value-added ingredients versus the traditional synthetics that were really a strong point in Q2. In terms of Fine Fragrance, the team also did a very good job at managing the challenges in the Middle East. If you remember, coming into the quarter, we expected growth to be down in Fine Fragrance mid-single digits. It actually finished up slightly positive, which was a good outcome. So the team really managed that uncertainty and volatility in the market. And while the Middle Eastern crisis continues, we are factoring in a softer Q3, really thinking about part of it is the 20% comparable. So year-over-year in Q3 last year, Fine Fragrance grew 20%. So it's a big comp, but still trending in the right direction and then really start to see some recovery as we get to Q4 overall.

The next question is from the line of Lauren Lieberman with Barclays.

I was hoping you guys could talk a little bit more about the plans to offset stranded overheads. We had originally thought that all of it would be addressed in the first year. So kind of curious what's changed there. And then now that Food Ingredients has been moved into discontinued ops, and we can see what the underlying business looks like, how should we think about where EBITDA margins could go over time?

Thanks for the question, Lauren. As we put together our plan on how to deal with the $100 million stranded costs with minimum disruption to driving profitable growth in Scent, Taste and Health & Biosciences, we believe the best approach is to commit to 2/3 in year 1 and the remainder by year 2, and we will move as fast as we can without harming Remainco's growth. So as we look at this, driving growth of the 3 Remainco BUs and dealing with the stranded costs in the right way are great opportunities for EBITDA margin expansion through that period.

The next question comes from the line of Nicola Tang with BNP Paribas.

I wanted to ask about cash flow. Michael, earlier, you mentioned that there could be some working capital headwinds related to the Food Ingredients divestment in the second half. Just wondering if you could put more numbers around it. What are your expectations for free cash flow conversion for 2026 and also on a go-forward basis ex the Food Ingredients business?

Thanks, Nicola, for the question. First, maybe I'm going to be a little bit less specific just because there's a lot of moving parts still with the separations and moving to discontinued ops for the Food Ingredients. But to your point, for the full year 2026, we continue to expect free cash flow to be higher than we reported in 2025. And that's inclusive of the headwind or working capital headwind that I alluded to on the call, specifically around the Food Ingredients stand. Just to size that, that could be a couple of hundred million dollars. And so that is a little bit of a change. But still year-over-year, we will get improvement in free cash flow. That's what we're targeting because the team is doing a really good job driving operational performance, but also from a net working capital perspective, really trying to drive that now as we go forward. Longer term, our Remainco businesses, Scent, Taste and H&B are cash-generative businesses. That's the beauty of the Remainco portfolio. And so in terms of simple definition, which is the way I would define it EBITDA minus CapEx divided by sales. Those 3 businesses should achieve mid- to high teens in terms of cash flow, that definition as a percentage of sales. And so that's nice. The Food Ingredients business is a little bit lower than that. And so there is a bit of a mix shift. And so as you think about the remaining business, you'll see the improvement in overall cash flow as we get to '27 and '28 on a go-forward basis. And then as Erik referenced, the same is true for both growth and margin as well.

The next question comes from the line of Laurence Alexander with Jefferies.

Erik, so on the topic of investor concerns around Chinese competition increasing over time. When we look at your R&D at about 9% of sales, my impression is that's about where it was before the divestiture. That's just like sort of making it clearer. When you think about the capital allocation, is the decision not to increase R&D or not to allocate any of the proceeds to R&D an indication that you're comfortable with your competitive moat? Or is it that you think that there just aren't the areas where the extra funding would make a difference to what happens over the next 4 or 5 years?

Thanks for the question, Laurence. Let me give you a couple of points here. First of all, I have a lot of experience in China, and we'll always view China as a critically important market and will never underestimate Chinese competitors. So our strategy is to ensure we bring leading innovation to customers and compete rigorously in China. So we have significantly increased our R&D capabilities and our spend over the last 2.5 years. Prior to this, the Remainco businesses were spending about 7% of sales on R&D. Today, we're spending about 9%. And we will continue to increase the R&D spend as we grow sales, and we'll also obviously look at the opportunities to create more value, and we'll consider increasing the percent of sales that we spend on R&D if we believe that will create additional value. So we're absolutely committed to competing strongly against any competitor around the world, including the Chinese.

The next question comes from the line of Patrick Cunningham with Citigroup.

I was hoping you could provide your current outlook for input cost inflation in the second half and whether or not you're encountering any pricing lag or customer resistance as you work to offset some of these inflationary pressures?

Thanks for the question, Patrick. For the second half of the year, we expect input costs, which I would define as raw material, energy and logistics to increase modestly. Specifically, just to dimensionalize, the most impacted will be, as you can imagine, energy and logistics costs. And then when I look at it from a business unit perspective, Taste -- sorry, Scent is the most impacted. Collectively, across all 3 divisions, we are working with our customers on surcharges and implementing as appropriately. As you know, though, in some instances, specifically in Scent, there is a bit of a lag. But over time, we will work with our customers to offset that. The team is doing a really good job at managing this and the uncertainty in terms of the overall environment. They are reacting with speed, and they understand the importance of making sure we get the recovery. So like I said, as we go forward, this is something that we will play -- it will start to roll into our P&L as we move through the second half of the year and into early '27.

And we keep pushing our productivity projects.

Correct.

The next question is from the line of John Robert with Mizuho.

First, congrats on all the progress here. For the ultra-processed foods and GLP-1 issue, it's still kind of hard to size both the opportunities and the risk here. And I understand it's been reduced with the sale of Food Ingredients. But is there a way to think about the percent of your sales for Taste and the food-related bioproduct businesses, what percent is exposed here to that opportunity and risk and -- or maybe an industry statistic, if you don't want to talk about your own sales?

Thanks for the question, John. A very important area, the GLP-1 and ultra-processed foods. And what I would say is that the flavors and food-related Biosciences have been growing very strongly in total and in significant part because instead of looking at these as negatives, as we've looked at them as opportunities and have been very proactively both on GLP-1s and the overall move to higher protein consumer products. And we've been very engaged with customers to enable them to have very high protein products that have great taste and are healthier. We also have been leaning into the clean label opportunity and have seen that as enhancing our growth. So if you look at our total Food Biosciences and Flavors business, the growth has been ahead of the market and because of our leaning into these as opportunities instead of just risks.

The next question is from the line of Josh Spector with UBS.

I have two kind of related questions here is that, one, just the outperformance in the quarter, 6%-ish organic versus a couple of percent consensus. Just wondering if there's a few things you'd attribute that to? And if any of that would relate to any customer prebuying here just given some expected cost inflation in second half? And then related with this is just the organic growth was stronger, but it didn't really flow through to the EBITDA. There wasn't much volume leverage. Why didn't we see more of that in 2Q?

Josh, thanks for that question. In terms of the outperformance in Q2, it was a really strong performance across the board. And actually, we didn't give it airtime, but the Food Ingredients business actually grew 3% as well. So collectively all around, it was a good quarter from a top line perspective. When I look at the remaining businesses, Scent, Taste and H&B, again, continuum and ops across all the subcategories and regionally for Taste, we actually delivered growth across the board. So it was a broad-based quarter in terms of overall success from that standpoint. In terms of leverage or flow-through from sales to EBITDA, you're right, we delivered 6% sales growth and 6% EBITDA growth. As I mentioned on the call, though, remember, it would have been a couple of points higher. But in the quarter, we increased our incentive compensation accrual based on the strong first half performance. And so that was a couple of percentage points. So we would have actually had some pretty good leverage in terms of the overall P&L. And so the team is really doing a good job at really driving the top line dynamic of the business and then also capturing productivity, as Erik mentioned before, to get that combined volume growth and productivity growth to really drive the EBITDA performance on a go-forward basis.

The next question is from the line of Lisa De Neve with Morgan Stanley.

You now delivered about 3 strong quarters of growth in H&B with probiotics back into the positive territory. I mean, what is the outlook for the probiotics business? And what initiatives have you executed on or do you plan to execute on over the next couple of quarters? And similar to that, I mean, where do you see the growth coming from? Is it supplement driven? Or do you see more inclusions into functional beverages and so forth?

Thanks for the question, Lisa. We see continued growth in our health business outside the U.S., but continued market challenges in the U.S. But we are very encouraged for getting back to growth over time, both for the market and for IFF Health in the United States. And we're encouraged by what we see as the increased need for the health benefits probiotics provide and interest by strong companies like, for example, Procter & Gamble's announced intention to acquire Thorne as a great example. So what we're doing is we've got a great team on the field now. We are strengthening our R&D pipeline. We're strengthening our commercial capabilities, engaging directly with customers, I would say, with more passion and more drive. And so over time, we will see the benefits of that.

The next question is from the line of Kevin McCarthy with VRP.

In looking at the financial data you provided on Slide #7, it strikes me that the free cash flow profile improves meaningfully through the separation of Food Ingredients. So in that context, I was wondering if you could elaborate on what impact the separation will have on your CapEx. I think you covered working capital already, but kind of curious about the capital budget and what you can tell us there quantitatively and conceptually as you look to pivot toward reinvestment and innovation and so forth.

Thanks, Kevin. I'll take this one. Erik did a great job explaining Remainco in terms of the shift. Really, just to reiterate, over time, we do expect sales growth rates to improve, EBITDA growth rates to improve. Gross margin is now in that 43-ish range. EBITDA is in the low 20s. So it's really a nice step forward in terms of kind of where we are. As we address some of the stranded costs, we will see the EBITDA margin continue to improve. So that is a big part of the investment thesis that I think about IFF. But in some of those key ratios you referenced, percentage of sales in terms of R&D that was on Erik's slide, you're in that 8% to 9% range, really important that we critically continue to reinvest in this business to making sure we set ourselves apart because it becomes that circle where we make those investments, we get the better growth rate and ultimately allows us to not only expand margin, but continue to reinvest. So innovation matters. So that's an important pillar for Remainco strategy going forward. On an SG&A perspective, it's probably somewhere between 17% and 18% of sales. And then as we address that stranded cost, that number should start to come down on a go-forward basis. And then lastly, which is your specific question on the CapEx piece, we will probably be in the range of 5% to 6%. Now remember, H&B runs at a higher rate when you compare to their best-in-class peer. And so that will be 1/3 of our business. And then I would compare the F&F or Scent and Taste towards the best-in-class peer there who runs a little bit lower. So when I think about the blended average, that 5% to 6% makes a lot of sense and intuitive of what we're targeting. But I will caveat that over the next 1 or 2 years, we think we'll be at the upper end of that 5% to 6% range, so more towards that 6% because we have some critical initiatives that we know that are good high-return initiatives that we're making on a go-forward basis. So, all in, we're really pleased with the transformation progress that we have. You see it from the financial statements of the change. But we also acknowledge that we still have a lot more work to do. But that through the reinvestment and through some of these step changes, we'll continue to drive the IFF transformational journey.

The next question is from the line of Matthew DeYoe with Bank of America.

Can you just give us an indication on maybe where price and volumes were for 2Q? And then how we should think about layering in price over the course of the year? And I guess, along that lines, just like some of the price/cost ebb and flow as it relates to the cadence, 2Q, 3Q, 3Q, 4Q.

Maybe I'll take this one, Matt. Thanks for the question. In the second quarter, growth was really all volume. That's across all the 3 divisions. So pricing was very little at the end of the day, if any. As we think about the second half of the year, that's also true. Volumes will be the primary driver of growth, again, across all the divisions. Pricing will be a modest benefit, but I would consider it a rounding decimal at this point in time, very honestly. As we progress going forward into 2027, that's where we'll see some of the pricing catch up. Hence, the lag that I referenced in the earlier on. So embedded in the guidance is a little bit of a press on price to input cost or raw material cost. And so we're managing that. As Erik referenced before, we're driving the productivity agenda to making sure that we can still deliver good EBITDA margin and EBITDA year-over-year growth, and it's a focal point for us on a go-forward basis. But as I think about the second half of the year, the most important aspect for me is really driving that volume, making sure we get that volume, good leverage and productivity that will help from an EBITDA perspective.

The next question is from the line of Jeff Zekauskas with JPMorgan.

Jeff, are you there? Operator, we can move on to the next question.

The next question comes from the line of Chris Parkinson with Wolfe Research.

On the Scent business, you've had a long-standing initiative to kind of get the balance there right, invest in R&D, grow your market share back. Can you just kind of break down how we should be thinking about the differences and kind of the drivers of the recovery in the Consumer Fragrance business? Obviously, it seems like there's some a little bit of noise due to the Middle East conflict on Fine Fragrances. But I'd love to just talk about how you see those things in the second half of the year and then top that off just with how you believe your R&D initiatives are going and how you think that business should further evolve into 2027?

Great. Thanks for the question. Let me start and then Mike can talk more about the financials. But first of all, I'm really, really pleased with the team that we have in Scent now. Ana Mendonça is a great business leader. She loves the Scent business. She's well recognized around the world. And she has a great team, Fine Fragrance, Consumer Fragrance, Fragrance Ingredients as well as the R&D teams. Really great leadership, really great teamwork and an absolute commitment to being leaders in this area. And this is an example, the R&D pipeline, I've got to say 2.5 years ago was not what it should have been. We were falling behind. Today, I think we've got a very strong R&D capability. We've got a great R&D team. We've got great perfumers that are developing absolutely leading -edge new Fine Fragrances and Consumer Fragrances. And we've got a great pipeline of molecules as well as delivery systems. So I couldn't be more pleased at the progress that we're making. Now we're not satisfied. We've done a lot of work, but a lot more to do, but we're making really good progress, strengthening our strengths and addressing our gaps and really I am very optimistic about the future of Scent. But Mike, do you want to add anything on that?

I think it's well said. Chris, the way I would dimensionalize just in terms of growth rates without getting too specific, Fine Fragrance, I suggest there will be a little bit softer in Q3, but a stronger Q4. So I'm thinking on a second half basis in the mid-single-digit range. And so again, continuing that trend on strong comparables. So that's a nice trajectory they have there. On the Consumer Fragrance side, you're in that low single-digit range. We had a really good Q2 at a high single-digit number, but that will -- we expect that, that will normalize a little bit on a go-forward basis to kind of a low single-digit number. And then the one area which I just want to make sure I'm 100% clear on the Fragrance Ingredients number, it was very strong in Q2. We do believe that as we go forward, that will normalize on a go-forward basis. So that one will be slightly under pressure in terms of year-over-year performance just to calibrate. But I think the team has really done, as Erik said, a good job on the compounds, which is fine and consumer to rebuild the R&D capability go-to-market approach with customers, and trying to drive market share gains there. And on the Fragrance Ingredients side, it is that shift that we talked about to higher-value natural products. So that's underway. That will take a little bit more time, not in the second half of this year. But as we go into next year and the year after, we believe we'll have a really strong competitive position.

At this time, there are no questions registered. So I'll pass the call back over to Erik for any closing remarks.

So thank you for joining the call today. We are very pleased with the progress that we've made over the last 2.5 years, but there's a lot more work to do. We've got to get Food Ingredients deal closed, Food Ingredients moved over to CVC and really ensure that we're driving Scent, Taste and Health & Biosciences to great futures. And I just want to finish by saying that I really, really appreciate what the colleagues -- our colleagues of IFF all around the world are doing to strengthen the company, deliver today but make us even better for the future. And then finally, just to close, I just am really proud of the leadership team that we have, including the 4 presidents of our businesses. Ana Mendonça I mentioned for Scent, Yuvraj Arora, doing a great job leading the Taste business. Leticia Gonçalves, leading our Health & Biosciences business, a terrific progress there. And then Andy Muller, who's turned around the Food Ingredients with his team business, gotten a great deal with CVC, a win-win deal with CVC, a great future for them and glad to have 10% ownership tail there as they grow that business. So just very pleased with the progress that we're making, but the best is yet to come.

Thank you all. At this time, this will now conclude today's conference call. We appreciate your participation. We hope you all have an amazing rest of your day. And at this time, you may now disconnect your lines.