# Year in Review

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_IFF_2018/NYSE_IFF_2018.mmd` · pages 1-7_

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Year in Review

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Named to Euronext
Vigeo's World 120
Index and qualified
for FTSE4Good
Developed Market
Index in sustainability

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Expanded our access to business with key global Scent customers via core lists

FULL-YEAR 2018 RESULTS
Company Financials

SALES
$4
BILLION

ADJUSTED EPS *
$5.58

ADJUSTED
OPERATING PROFIT *
$677
MILLION

ADJUSTED EPS EX
AMORTIZATION *

$6.28

FULL YEAR CURRENCY
NEUTRAL SALES RESULTS

TASTE
5%

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SCENT
4%

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Cosmetic Active
Ingredients continued
to grow double-digits

Tastepoint™ in
North America Taste
continued to grow
double-digits

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Joined Barron's
100 Most Sustainable
U.S. Companies list

Surpassed three
of our four 2020
environmental
targets

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Awarded a place on the CDP Climate "A" List for the 4 \( ^{th} \)  year in a row and received an "A" for Water Security for the first time

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## Dear Fellow Shareholders,
Customers & Employees

For everyone who's celebrated a birthday or recognized an anniversary, the sense of wonder another year brings is a familiar one. That awe in hard-earned accomplishments. The pride in learning valuable lessons and continuing on to even greater successes. And most importantly, the vision of what the future holds.

For a company to reach its 130 \( ^{th} \)  anniversary, it is nothing less than a tribute to the countless employees who've invested their talents and expertise in us throughout the years. It's a testament to our customers and shareholders who believe in our products, our values, and our drive to be the best in our industry.

Our 130 \( ^{th} \)  anniversary is a momentous occasion, a focal point when the dynamics that have brought us to this place connects our legacy with our future vision. 2018 was a year of great change inside IFF. We underwent a monumental joining with Frutarom, which established us as a global leader in taste, scent, and nutrition. The combination of IFF and Frutarom is truly unique and compelling as it enriches our portfolio with a stronger product offering with an increased focus on naturals and health and wellness, as well as more comprehensive solutions.

"2018 was
a year of
great change
inside IFF."

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It also enhances our exposure to the fast-growing small- and mid-sized customers, including private label, and provides opportunities to expand into attractive and fast-growing categories, such as savory solutions, natural colors, natural food protection, and health ingredients. Throughout the year, we also transformed our commitment to diversity and inclusion into an employee-powered mission. And our pledge to treat the world gently was recognized by international organizations and escalated with the launch of new environmental goals and ambitious science-based targets.

"We stand on
the shoulders
of giants."

There's a saying at IFF: "We stand on the shoulders of giants." It means everything we've achieved is a direct result of those who've come before us. Nothing can be truer for a company that started in a small Dutch town in 1889 when two gentlemen went into the fruit juices business. Joseph Polak and Leopold Schwarz had a passion for naturals, flavors and sensorial experiences that has led IFF for generations. The same can be said for A.L. van Ameringen, who in 1918, shortly after his dismissal from Polak & Schwarz, established what would become van Ameringen-Haebler, a company that withstood The Great Depression and a world war to bring aromatic expressions to a growing customer base.
1959 saw the merger of these two powerhouse companies and International Flavors & Fragrances Inc. was established. Since then, this company has engaged in a calculated, fruitful growth strategy that has increased our financial viability, strengthened our R&D, deepened our value to our customers, and provided our employees with growth – both professionally and personally. From Bush Boake Allen to Laboratoire Monique Remy (LMR) to Lucas Meyer Cosmetics to our recent acquisitions of David Michael and Ottens Flavors – now joined as Tastepoint by IFF – and so many others, each acquisition has been a historic moment for IFF and one which has transformed us into who we are today.

Even as our combination with Frutarom was our historical event of 2018, the year held many other significant moments to be celebrated. In R&D, we continued down our path of innovating firsts by launching three natural taste modulators and two fragrance molecules. And with new partner Amkiri, we delved further into pioneering sensorial experiences with Visual Fragrance \( ^{™} \) , a multisensory body art.

Aligned with top customers, we were especially excited to be recognized as Best Innovation Contributor Laundry & Home Care by one; and through the execution of our business strategy, we were truly the partner of choice as we earned core list status with several customers over the course of 2018. As a global manufacturing organization, we continued to embrace governmental compliance, safety, and quality. In 2018, our GRA team culminated a ten-year effort to achieve REACH compliance, a mandate in sync with our essential belief in championing safe ingredients and customer confidence. Over and beyond the diligence needed for REACH compliance, we systematically drove compliance training throughout IFF to ensure our products are safe and adhere to the regulations of the land.

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In our 130-year history, we have only designated five notables with the highly esteemed mantle of Master Perfumer. Carlos Benaim was our first – which I spoke about last year – and in 2018, we added Dominique Ropion, Steve Nicoll and Francisco Marano to the ranks. Each unique in their expertise in the wide breadth of Fine and Consumer Fragrances, and each with a diverse and innovative olfactory expression to offer our customers and consumers.

Sustainability also continued to be a prevalent part of our everyday as we surpassed three of our four 2020 environmental targets and launched our new environmental goals with ambitious science-based targets. Our efforts continued to be recognized as we joined Barron's 100 most sustainable U.S. companies list, qualified for FTSE4Good Developed Market Index for the first time, and we were named to Euronext Vigeo's World 120 Index – an index that ranks us amongst the top companies within the Euronext universe. In addition, IFF-LMR Naturals continues to lead the industry with 90 certified vegan natural extracts and IFF-Lucas Meyer Cosmetics successfully strengthened our product profile with the acquisition of sustainable ingredients and associated intellectual property from the pioneering Kemin Industries. Our unique position of intertwining the legacy beauty industry with the demands of today's consumers is being fully realized. This is all being done as we work to lead the market in the evolution of health, wellness, and sustainability.

Our employees are the real leaders pushing us towards an expanded future. They challenge and enhance our every effort. In Greater Asia, we opened a new flavors plant in Zhangjiagang and not too far away in Nanjing we opened the first IFF naturals lab outside of the U.S. The ownership our employees exuded over the intricate process of establishing these new sites was a clear sign that their commitment to the success of the company runs deep. We couldn't be prouder of the new sites or of the employees who worked so hard to make it happen.

Part of their drive stems from the dedicated architecture of growth and development we work to instill at IFF. Our push to build our talent and organization comes from the knowledge that our employees are our future, just as they are the reasons for our successful past. We have broadened the employment training available to IFFers through our IFF University and nurtured an environment where the uniqueness of our employees is unleashed through vibrant employee communities, such as our Women@IFF, an employee resource group that has empowered women for years at the company.

"Our employees are the real leaders pushing us towards an expanded future."

I'm pleased to say that our standing externally in the market is just as strong as our building blocks within. We finished the year with approximately $4 billion in annual sales, $677 million in adjusted operating profit, \(5.58 of adjusted EPS, * and \)6.28 of adjusted EPS ex amortization.* Top line was driven by a mid-single-digit performance in Taste propelled by growth in all regions and categories; and a mid-single-digit increase in Scent with high-single-digit growth in Fragrance Ingredients, led by double-digit growth in Cosmetic Active

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Ingredients and a mid-single-digit performance in Consumer Fragrances. In addition to this, Frutarom sales added to our performance in 2018 to produce this historic topline result.

In 2018, we also increased our quarterly dividend 6% reflecting the Board's confidence in the cash generation potential and financial strength of the Company. This is the ninth consecutive year that the Board has approved an increase in our quarterly dividend. All in all, we returned approximately $245 million through dividends and share repurchases, to you, our shareholders.

As I shared earlier, our company had many exciting moments in 2018, but by far one of my most personally rewarding experiences of the year was captured while visiting a non-profit nursing home near the banks of the Hudson River in the Bronx. In March, we established a scent-based exhibit at the Hebrew Home at Riverdale that brought memories of bygone days at Yankee Stadium to life for the elderly residents of the home. We know that scent sparks emotion, but to therapeutically use our scents to resurrect nearly forgotten memories of joy and wonder was awe-inspiring.

The coming together of IFF and Frutarom was a momentous achievement, and we are excited to be moving forward as one company and pursuing new opportunities that benefit all our stakeholders around the globe. In 2018, we celebrated the creation of a new IFF with even greater aspirations as a leader in taste, scent, and nutrition. On behalf of everyone at IFF, we welcome Frutarom and its talented team and look forward to working closely with all employees to continue to deliver winning products to our customers and maximizing long-term value for our shareholders. Now, as we look to the future, we know that with our people, our innovations and our commitment to succeed, we are well on the way to creating many more notable moments in history.

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Andreas Fibig
Chairman and Chief Executive Officer

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