IFF 2026 年第三季法說會：營收成長 5% 調升財測指引

重點摘要

• IFF 2026 年第三季營收近 20 億美元，在可比中性匯率基礎上年增約 5%，三大持續經營業務部門均實現成長。
• EBITDA 成長 6% 至 4.03 億美元，EBITDA 利潤率擴張 20 個基點至 20.8%，主要受銷量增加所支撐。
• 風味 (Taste) 與香精 (Scent) 業務銷售額均成長 6%。香精業務引領獲利成長，部門 EBITDA 成長 10% 至 1.39 億美元。
• 今年累計自由現金流達 3.71 億美元，較去年同期增加 2.45 億美元，主要受益於淨營運資金的改善。
• 管理層上調了全年指引的下限，目前預計銷售額為 75 億至 76 億美元，調整後營運 EBITDA 為 15.5 億至 16.0 億美元。
• 由於季節性因素、成本上升以及對健康與生醫 (Health & Biosciences) 的投資，第四季獲利能力預計將呈季減。

關鍵財務數據

業務與營運表現

風味業務銷售額成長 6%，所有地區均實現成長。大亞洲地區錄得雙位數成長，拉丁美洲實現高個位數成長，EME（歐洲、中東及非洲）實現中個位數成長，北美則呈現低個位數成長。管理層將成長動能歸因於創新、贏得新業務，以及與全球、區域和在地客戶更緊密的合作。

香精業務銷售額亦成長 6%。消費品香精 (Consumer Fragrance) 實現高個位數成長，而高級香精 (Fine Fragrance) 和香精原料 (Fragrance Ingredients) 各錄得中個位數成長。高級香精受益於歐洲與北美的新獲訂單，中東市場則顯現穩定跡象。香精原料繼續專注於高價值的特種產品，包含天然原料。

健康與生醫銷售額成長 1%。食品生醫 (Food Biosciences) 與糧食加工 (Grain Processing) 的中個位數成長，抵消了健康業務的疲軟。管理層表示，美國與歐洲的膳食補充劑需求維持疲軟。公司正拓展商業能力、多元化客戶群，並重建創新產品線，包括推出 GutABAlite。

IFF 持續進行投資組合簡化。公司預計於 2027 年上半年結束前，完成將食品原料 (Food Ingredients) 業務以約 43 億美元出售給 CVC Capital Partners 的交易。此外，公司已完成大豆壓榨、濃縮物與卵磷脂業務的出售，並預計其他非核心業務的未完成拆售案將在年底前完成。

公司完成了 5 億美元的加速股票回購 (ASR)，買回約 580 萬股，約占已發行股份的 2.3%。管理層不打算在 2026 年第四季進行額外的股份回購。

管理層財務指引

IFF 目前預計 2026 全年銷售額約為 75 億至 76 億美元，調整後營運 EBITDA 為 15.5 億至 16.0 億美元。基於今年累計的執行力與持續的銷量成長動能，管理層上調了這兩項預測區間的下限。

面對較高的高基期比較，管理層預計第四季可比中性匯率銷售額成長率約為 3% 上下。目前並未發現顯著的客戶庫存管理影響到市場需求。

第四季利潤率預計將呈季減。管理層指出原因為正常季節性因素、不利的價格成本時間差、健康業務銷量趨緩，以及對健康與生醫業務進行的臨時研發與商業再投資。

針對 2027 年，管理層表示約 3% 的投入成本通膨率符合當前趨勢，但也強調現在談論尚早。定價協商正在進行中，管理層預計價格成本差距在 2027 年第一季最大，隨後逐季改善，並可能在今年晚些時候轉為正值。

風險與關注焦點

• 健康業務持續面臨終端市場需求疲軟的挑戰，特別是在美國與歐洲的膳食補充劑領域。
• 原油衍生品、能源及物流成本上漲正在影響所有三個持續經營業務。
• 價格調整需要時間來抵消通膨，這將在 2026 年第四季帶來不利的價格成本效應，並預計在進入 2027 年時產生差距。
• 剝離食品原料業務在營運上相當複雜。IFF 正同步準備該筆交易，並致力於消除滯留成本 (stranded costs)。
• 由於地緣政治局勢不穩定，管理層對中東地區的高級香精需求保持審慎態度。
• 在透過短期借款支應初始 5 億美元的回購後，淨槓桿率小幅上升至 2.75 倍。IFF 預計將利用食品原料出售案的收益來償還該筆債務。

分析師問答重點

管理層表示，健康業務的疲軟反映的是整體市場狀況，而非對該領域長期需求看法的改變。應對措施包括加強商業執行力、客戶多元化和推出新產品，但復甦部分取決於消費者需求的改善。

關於通膨，管理層指出物流和能源是近期的主要壓力，而第四季健康與生醫財報中反映的原物料成本則被描述為相對溫和。定價策略與採購生產力的提升旨在隨時間推移抵消這些壓力。

管理層將 GLP-1 的普及視為風味與食品生醫業務的契機。管理層表示，對高蛋白質、高纖維、低糖和低鈉產品的需求，支撐了客戶在 GLP-1 用戶之外的創新計劃。

關於食品原料業務的拆分成本，管理層重申計劃在交易完成後的 12 個月內消除約 1 億美元滯留成本的三分之二。具體行動包括重新談判合約、將工作移交給全球業務服務機構、技術部署以及組織重組。

管理層維持風味、香精以及健康與生醫業務可實現 4% 至 6% 常態化年銷售成長的看法，同時強調目前健康市場狀況仍具挑戰性。

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管理層陳述

Operator

At this time, I would like to welcome everyone to the IFF Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to introduce Michael Bender, Head of Investor Relations. You may begin.

Michael Bender

Thank you. Good morning, good afternoon and good evening, everyone. Welcome to IFF's Third Quarter 2026 Earnings Conference Call. Yesterday afternoon, we issued a press release announcing our financial results. 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.

During the call, we'll be making forward-looking statements about the company's performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning factors that can cause actual results to differ materially, please refer to our cautionary statement and risk factors contained in our 10-K and press release, both of which can be found on our website.

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 set forth in the press release.

Also, please note that all sales and EBITDA growth numbers that we will be speaking to on the call are all on a comparable currency-neutral basis, unless otherwise noted. Given the announced divestiture of Food Ingredients, we discuss the results and guidance on a continuing operations basis, unless otherwise noted. Our P&L financials are presented on a continuing operations basis, while cash flow, net debt to credit adjusted EBITDA leverage and CapEx are presented on a total company basis, which includes both continuing operations and discontinued operations.

With me on the call today is our CEO, Erik Fyrwald; and our CFO, Michael DeVeau. We will begin with prepared remarks and then take questions at the end. With that, I would now like to turn the call over to Erik.

Jon Erik Fyrwald

Thanks, Mike, and hello, everyone. Thank you for joining us today. IFF delivered strong results in the third quarter, with year-over-year growth across every business segment. We drove increased revenue and improved profitability across all divisions, with particularly strong performances in Taste and Scent. Our progress through the first 9 months of 2026 is evidence that our portfolio transformation is better positioning IFF for strong growth and sustained healthy margins. This solid year-to-date performance gives us the confidence to raise the lower end of our full year guidance ranges, even when factoring in the ongoing macroeconomic uncertainty the world is facing. In short, our team is executing on our strategy, and we have momentum delivering value for our customers and for our shareholders.

I'll start today's call by briefly summarizing our results and providing an update on our strategic progress and continued portfolio transformation efforts. I'll then turn the call over to Mike DeVeau, who will provide more details on the third quarter results, segment performance and our outlook for the remainder of 2026.

Turning to Slide 6. I'm encouraged by IFF's strong performance over the first 9 months of 2026. Sales grew 4% and EBITDA rose 7%, delivering a 50 basis points improvement in adjusted operating EBITDA margin, all on a currency-neutral basis. In the third quarter, we delivered both top and bottom line growth across all segments. Our solid third quarter was led by mid-single-digit sales growth contributions from Taste and Scent, and modest sales growth in Health & Biosciences, driven by contributions from new wins and from existing business.

For the first 9 months of 2026, free cash flow totaled $371 million, and this represents a gain of $245 million versus last year, supported by improved net working capital, an area of focus for us as we came into 2026. We also recently completed our accelerated share repurchase plan, returning $500 million to shareholders, underscoring our confidence in the direction of the business and our strategic plan. At the same time, we continue to invest in our highest growth opportunities, which positions us well for the years ahead.

Given the strength of our volume growth and our strong year-to-date performance, we are raising the low end of both full year guidance ranges. We are controlling what we can control and delivering the financial commitments we set out earlier in the year, a testament to the resilience of our business amid changing macroeconomic conditions, and their impact on input costs, currencies, interest rates and consumer demand.

Our updated outlook incorporates some near-term profitability softness in the fourth quarter, particularly in Health & Biosciences, where we are seeing higher costs and continued market softness. At the same time, the team remains fully focused on strengthening the business through reinvestment. We are also working with customers on pricing and driving productivity to mitigate higher costs, positioning us well going forward and giving us confidence that we can deliver financial results within our guidance range.

In IFF, we are delivering for our customers, advancing our strategy and building a more focused, innovative and stronger company. I want to recognize that this would not be possible without the dedication of our global team. Our results demonstrate the impact of our volume growth initiatives and productivity, while our disciplined approach to capital allocation continues to create value for our shareholders, and we remain focused on building on this progress and executing with discipline through the year-end and beyond.

Now moving to Slide 7. I want to step back from the quarter and update you on our progress against the growth-oriented simplification strategy we introduced in early 2023. Throughout the year, we have focused on keeping the strategy at the center of our decision-making, continuing to strengthen our position as a global industry leader, while sharpening our portfolio focus on high-value, consumer-centric ingredients markets.

As we shared last quarter, we agreed to sell the Food Ingredients business to CVC Capital Partners for about $4.3 billion. The separation is progressing well, and we remain on track to close the transaction by the end of the first half of 2027. As the separation advances, our focus remains with CVC on achieving the planned closing time line. We will continue to balance speed with rigor, ensuring that the transaction readiness and ongoing business priorities move forward together. While a separation of this scale and complexity requires significant focus and effort, we have aligned the team with incentives to reinforce disciplined execution, maintain momentum and move with appropriate speed.

We also completed the sale of Soy Crush, Concentrates and Lecithin, or SCL, and agreed to divest the nonstrategic botanical extracts, vitamins and minerals and food enhancement businesses, which we expect to close by year-end. With Food Ingredients and SCL now reported as discontinued operations, our continuing operations are Taste, Scent, and Health & Biosciences. Our portfolio now reflects our commitment to a sharper, high-quality portfolio with stronger growth and margin potential aligned to the long-term mega trends that shape demand across our industries.

In the wake of this transformation, we are utilizing our capital in the most efficient and effective ways possible to drive our growth potential. We announced a $2.5 billion share repurchase authorization, including a $500 million accelerated share repurchase that we have already completed. At the same time, we are investing in profitable growth opportunities, while doubling down on the innovative creativity and technology solutions expertise our customers expect from IFF. Recent milestones include opening of Vanilla Innovation Center in Madagascar, launching a home care application lab in Brazil and expanding our fermentation-based enzyme capabilities in Argentina. We will also launch a new state-of-the-art scent creative center in Mumbai in December. And together, they show IFF's distinctive blend of science and creativity at work.

With a simpler operating model and strengthening manufacturing network, we will be better positioned to accelerate innovation, improve execution, enhance free cash flow conversion and deliver a stronger long-term growth and margin profile. Our shared naturals and biosciences capabilities power growth opportunities across Taste, Scent and Health & Biosciences, and the progress we are delivering confirms that our strategy is working and positions IFF to create sustainable value. However, there is more work ahead as we look to continue this journey.

Now with that, I'll pass the call to Mike for a closer look at this quarter's consolidated results. Mike?

Michael Deveau

Thank you, Erik, and thanks, everyone, for joining us today. On Slide 8, we take a closer look at our Q3 consolidated results. IFF generated revenues of just under $2 billion in the third quarter, up roughly 5% on a comparable currency-neutral basis, with growth across all businesses. This strong performance was led by mid-single-digit growth in Scent and Taste and a low single-digit performance in Health & Biosciences. Growth was primarily driven by volume, with contributions from both new wins and growth on existing business.

EBITDA totaled $403 million for the quarter, up 6%, driven by volume contributions, and EBITDA margin was 20.8%, up 20 basis points, both of which are on a comparable currency-neutral basis. These results show the progress we are making in executing our volume and productivity-focused strategy and importantly, the combination of sales growth and margin expansion demonstrates our ability to translate volume gains into improved earnings.

On Slide 9, I'll provide a closer look at the performance of each business segment. In Taste, sales increased 6% to $687 million, with growth across all regions once again. Greater Asia led the way with double-digit growth, followed by Latin America, which was up high single digits, [ EME ] up mid-single digits and North America up low single digits.

Looking at profitability in Taste, the segment delivered EBITDA of $128 million, a 7% increase from the year ago period, driven by volume growth. In Scent, sales grew a strong 6% to $689 million. Third quarter performance was driven by a high single-digit increase in consumer fragrance and mid-single-digit performances in fragrance ingredients and fine fragrance, which was up against a strong double-digit year ago comparable. Scent profitability was also strong, with EBITDA growing 10% to $139 million. Volume growth was the primary driver of the increase in profitability.

Lastly, Health & Biosciences grew 1% to $566 million. Mid-single-digit growth in food biosciences and grain processing more than offset a decline in health, where the market conditions are challenged. As Erik noted, the team continues to work on the health turnaround and remain focused on the factors within our control. This includes sharpening our execution, advancing self-help initiatives and investing selectively to strengthen the business to position the health business for improved performance as market recovers. Health & Biosciences EBITDA increased 2% to $139 million, driven by volume growth as well as some favorability in net price to input cost.

Turning to Slide 10. Cash flow from operations totaled $820 million and year-to-date CapEx was $449 million, representing about 5.4% of sales. Our free cash flow position in the first 9 months of the year was $371 million, up $245 million from last year.

During the first 9 months of 2026, we returned $306 million to shareholders through dividends and an additional $584 million for share repurchases. As Erik noted, we recently completed our $500 million accelerated share repurchase program, where we repurchased approximately 5.8 million shares or approximately 2.3% of our shares outstanding. With the completion of this first accelerated share repurchase program, we are not planning to repurchase additional shares for the fourth quarter of 2026.

At the end of the third quarter, cash and cash equivalents totaled $519 million, including $242 million in discontinued operations and $5 million held for sale. Gross debt totaled approximately $6.3 billion. Trailing 12-month credit adjusted EBITDA remains above $2 billion, while net debt to credit adjusted EBITDA increased modestly to 2.75x as of September 30. As discussed last quarter, the increase reflects short-term debt used to fund our initial $500 million share repurchase program. We expect to repay that debt with proceeds from the Food Ingredients transaction when it closes, and we remain committed to disciplined capital allocation and maintaining a strong balance sheet.

Turning to Slide 11, let me walk you through our outlook. We have delivered strong results year-to-date and executed consistently, giving us confidence to raise the low end of our full year guidance ranges. Despite continued macroeconomic uncertainty, we believe we are well positioned to deliver results within our ranges. For the full year, we now expect sales of approximately $7.5 billion to $7.6 billion and adjusted operating EBITDA of $1.55 billion to $1.6 billion. The increase in the low end of both of our ranges reflects our year-to-date performance and continued volume momentum into the fourth quarter.

In Q4, we expect continued sales growth, driven by volume increases. As Erik has highlighted, our health business within Health & Biosciences remains challenged as end markets are soft. Fortunately, the rest of our business remains solid, so the impact on Q4 sales growth is limited. Q4 profitability margin is expected to moderate sequentially, quarterly due to seasonality where Q4 margin is the lowest of the year, but also due to higher costs and investments specifically in Health & Biosciences.

We are working closely with our customers on targeted pricing actions and driving productivity where we can to improve profitability moving forward. We remain focused on the factors within our control, which include advancing commercial opportunities, converting our innovation pipeline, executing targeted pricing and driving productivity across the organization. These actions support our confidence and continued momentum while strengthening the business for long-term sustainable growth.

We've made strong progress this year, and our results demonstrate that we are delivering on our commitments. We intend to finish 2026 with the same discipline and focus, setting us up well as we head into 2027.

With that, I would now like to turn the call back over to Erik for closing remarks.

Jon Erik Fyrwald

Thanks, Mike. Now let me close with this. IFF has delivered strong performance across our businesses, and we are following through on our commitments. We've made meaningful progress on our strategic priorities, and the results show that our efforts to simplify the portfolio and position IFF for stronger growth and higher margins are taking hold. We know the environment remains uncertain, but IFF is built to navigate periods like this. We are staying focused on what we can control, serving our customers through innovation and new product development, driving productivity and strengthening cash flow. We are taking the right steps to deliver on our 2026 commitments while building a stronger, more focused IFF positioned for sustained long-term performance.

Thank you for your time today, and we'll now open the line for questions.

Operator

[Operator Instructions] Our first question will go to the line of Josh Spector with UBS.

分析師問答

Anojja Shah

It's Anojja Shah sitting in for Josh. I wanted to just get some more detail on the step down in health. You called out slower growth, but could you also talk about the costs that might be needed to turn around that business? What steps exactly are you taking, and how does that impact your expectations for 2027?

Jon Erik Fyrwald

Thanks for the question, Anojja. This is definitely a market situation. Consumers in the U.S. and Europe have reduced spending on dietary supplements due to the economic pressures that many of us are feeling. And as I've been saying for a while now, our response is to, first of all, strengthen our commercial capabilities. We're making good progress there. Diversify our customer base. We're also making good progress there. And work closely with our customers to help better position the clinically proven benefits of our products. And we're making progress there. But we're also strengthening our innovation pipeline, and we just launched our first new product in quite a few years, GutABAlite, and the customer interest has been very strong, starting out of the gate for that. So a lot of things going right that we can control, but the market is very soft.

And so what I can tell you is that the need for our types of products, I believe, is very strong. So we're going to get through this. It's just taking time, and some of the economic pressures have to be overcome by showing people that need the products that our products will do the job. So we're working on that, making progress.

Operator

The next question will go to the line of Nicola Tang with BNP Paribas.

Ming Tang

I wanted to ask about the higher costs that you indicated in the outlook. Did the higher cost simply relate to the higher oil or derived raw materials and energy costs? And what's your outlook for input inflation into 2027? This morning, DSM-Firmenich mentioned expectation for 3% raw material inflation for 2027. I was wondering if that resonates with you as well?

Michael Deveau

Thanks, Nicola. Great question. Yes, the largest increases we're seeing are related to higher oil derivatives, including the impact on energy and logistics. It's pretty broad-based. We're seeing it across all the 3 continuing operations business.

As we look into 2027, it's early to comment to it, but the number you mentioned, call it, that 3%-ish number, feels right. It's consistent with the trends that we're seeing today, so not a big material difference, again, across the continued operations part of our business. Part of this is related to the run rate impact of having higher Brent crude prices, which is impacting petros, logistics and energies, but we're also seeing some inflation in raw material costs overall. The good thing is, as you know the industry really well, we are engaging with our customers now on pricing actions, and we will continue to work with them to recover this impact over time, and that's very consistent to what we've done in the past.

Operator

The next question will go to the line of Ghansham Panjabi with Baird.

Ghansham Panjabi

Just following up on Nicola's last question on cost inflation. Can you just update us on where you are on pricing as it relates to time line to achieve parity? Obviously, this is a very dynamic environment. Your customers are feeling a lot of pressure, and that permeates all the way through the supply chain to the consumer as well. So what is a reasonable time line to achieve that parity in terms of price cost?

Michael Deveau

Yes. Thanks, Ghansham. It's a great build on the previous question. We're not getting into too much of the specifics. As I said, we're actively engaging with our customers now to fully recover the impact. The good thing is the timing is now. We're in the middle of pricing discussions, which happens during this time of the year, and we'll continue into December. In Q4, we are expecting that price to input costs to be unfavorable due to some of this lag impact. But we expect, as we move through 2027, we will close this gap and improve over time.

In terms of the calendarization aspect of it, I would expect to see an improvement each quarter as we progress through. So the biggest gap in Q1. And then as we progress through the year, we should close that gap and then hopefully flip to a positive number on a go-forward basis. And so in addition to that, though, we are also working through driving some additional productivity across the business and specifically in procurement to also help balance and minimize and offset that impact as well, in conjunction with the pricing actions. So still more work to be done, but the team is fully engaged, and we're acting on it right now.

Operator

The next question will go to the line of Kevin McCarthy with Vertical Research Partners.

Matthew Hettwer

This is Matt Hettwer on for Kevin McCarthy. Can you walk us through your third quarter results in the Scent business? What's driving the strength in Consumer Fragrances, and are further R&D investments needed to accelerate growth within Fine Fragrance and Fragrance Ingredients?

Michael Deveau

Sure. Thanks for the question, Matt. First of all, Consumer Fragrance unit had high single-digit growth in the quarter. And both Fine and Ingredients Fragrance had mid-single-digit growth.

Now to start with the Consumer Fragrance business, it's a solid market right now for Consumer Fragrances, but we are getting more than our fair share. We've got a very strong team led by Jan Bechtel, and we've been strengthening our innovation, as we've been talking about for the last 2 years. Charbel Bouez leads that group and is doing a great job with his team to strengthen that innovation and starting to get it out into the marketplace. And we have great perfumers. So with that combination, we've had new wins with both global and regionals and a very solid position with our Consumer Fragrance unit.

In Fine Fragrance, we are coming off of a very high double-digit comparison last year, and we delivered mid-single digit this quarter. And I think it's a very solid progress that we're making there with new wins in both Europe and North America, very attractive wins that I think will show growth going forward. And we're starting to see a bit of a turnaround in the Middle East. So solid performance by Fine Fragrance.

And in Ingredients, we continue to focus on our higher-value specialties and less focus on the commodities, that's working. And our strong pipe innovation pipeline is starting to deliver new products to enable us to continue to move on that strategy. So overall, solid growth in Scent. And I believe that with all the investments that we've made and are making, that will continue.

Operator

Our next question will go to the line of Abigail Eberts with Wells Fargo.

Abigail Eberts

I hope I'm not beating a dead horse here, but another one on profitability headwinds in Health & Biosciences for 4Q. Just wondering if you can give us a little bit more color there? What's coming from cost inflation versus what's coming from reinvestments in the business? And then on the cost side, if you could give us a little bit more specific color on what you're seeing in your raw material basket versus freight versus energy costs?

Michael Deveau

Abigail, great question, and congrats on the new role. I think Erik did a really good job at summarizing this. So let me recap. I apologize if it's a little bit repetitive, but I do think it's important. In Q4, the margin and profitability performance in H&B is really, in my mind, impacted by 3 things. One, we see some volume softness within the Health business. And so remember, Health is one of our stronger margin business. So there's a mix dynamic. So that's point number one.

Point number two, we are seeing unfavorable net price to input costs. And really, that's a logistics and energy piece. Raw material piece are pretty benign. And really so what's flowing through the P&L, what you're seeing now is logistics and energy costs.

And then the third one for me is really just a timing impact. And again, it's timing impact of reinvestment in R&D and commercial within H&B. So when I think through those 3, I believe, as we move forward, we will see improvement, right? Inflation, we will cover in terms of overall price and productivity, and the timing of reinvestment will eventually go away as it's temporary in nature. And so then when you layer on the fact that some of the work that the team is doing within H&B, and they're working very hard to strengthen that Health business, that when the market does recover, we will be in a strong position to capture more than our fair share of upside going forward. So that's kind of how I would contextualize the overall performance.

Operator

The next question will go to the line of John Roberts with Mizuho.

John Ezekiel Roberts

IFF just published another review of the GLP-1 opportunity. Is there a way to quantify the commercial opportunity for Taste or how big the category could be? And maybe your thoughts on ultra process labeling as well, if there's been any update there.

Jon Erik Fyrwald

Right. Thanks for the question, John. We got a lot of questions -- about 1.5 years ago about the negative impacts of GLP-1s. I can just tell you that, helped by my Eli Lilly Board experience, we leaned into GLP-1s early across IFF, not just in Taste, but also in Food Biosciences and in our Food Ingredients business. The results -- the resulting desire of users, the GLP-1 users, for higher protein products that taste great, has been an opportunity for us. And what I would say is this desire for our protein has also become a broader trend, and we don't think it's a fad. We think it's a real trend.

And then the also, on top of that, is the desire for more fiber, and I would say, lower sugar and lower sodium. And we are able to help our customers develop great tasting food products that meet those needs, not only for GLP-1 users, but for broader people that want great tasting products that are also healthy. Because of that focus, our Taste business has been able to grow consistently ahead of the market as well as our Food Biosciences business also. So we see that as the GLP-1 penetration goes from today, very small, to much higher, we see that opportunity continuing to be there, and we'll continue to go after it and seize the day.

Operator

The next question will go to the line of David Begleiter with Deutsche Bank.

David Begleiter

Erik, just in Q4, what's driving the potentially slower currency-neutral sales growth in the quarter versus the 5% to 6% you posted in Q2 and Q3? Is this due to maybe some destocking or customer inventory management at the end of the quarter?

Michael Deveau

Erik, maybe I'll jump in on this one. David, thanks for the question. Let me start by just saying that Q4 sales trends are currently solid. While there's a lot of going on in the world right now, the trend remains favorable, and we expect to finish Q4 around that 3-ish percent number, plus or minus. And so I think the fundamental volume story is still intact and it is strong. This is a solid number that, as we consider relative to the year ago comparison, which gets harder in the fourth quarter.

So again, David, I look on a 2-year basis, when you add them and divide it by 2, simply, it's almost the same number, Q3 -- Q4 versus Q3. And so what that means in our view is that we don't believe there's any material customer inventory management at this time. That all being said, we are totally focused on making sure we're working with our customers on the pricing aspect, but also helping them build their business more closely going forward. And so really, that's something that IFF is really, really focused on as we go into 2027.

Operator

The next question will go to the line of Patrick Cunningham with Citi.

Patrick Cunningham

Maybe just coming back to Fine Fragrance. How would you characterize the strong growth that you've seen there? Are there any particularly strong regions? And have you seen any sort of stabilization or recovery in Middle East demand?

Jon Erik Fyrwald

Yes. Thanks for the question, Patrick. The U.S. and Europe were particularly strong, with some exciting new wins with major fragrance houses. And I would say that the demand or the desire from consumers continue in those regions.

In terms of the Middle East, we have seen stabilization of the business and some indications of growth. But given that very unstable geopolitical situation, we remain cautious about the future, but we are working with our customers there to launch really great new products that I think will be also exciting growth opportunities, but there are challenges, as you know.

Operator

The next question will go to the line of Laurence Alexander with Jefferies.

Daniel Rizzo

It's Dan Rizzo on for Laurence. So with the Food Ingredient separation, I think you've identified roughly $100 million in stranded costs, with about 2/3 expected to be eliminated within 12 months. I was just saying what actions are already underway? What are the principal execution risks? And could reinvestment elsewhere delay some of the net savings?

Michael Deveau

Daniel, another great question. Maybe I'll take this one. In terms of the overall stranded costs, the team is actively working to eliminate exactly what you said, 2/3 of the cost within the first 12 months of closing. So nothing has changed there. The key actions underway, in my mind, are third-party contract renegotiations, transferring some of our work to our GBS organization to really leverage scale and efficiency there. Also implementing technology across the business to try to make sure we get some more efficiency there. And then ultimately, looking at the organization and making sure our structure is appropriate for the RemainCo part of IFF. So as we step down in size, we want to make sure that we are fully structured to be successful from that standpoint.

In terms of execution risk, again, the team is fully committed. The one thing that I remind everybody on is that we're rapidly working to close the transaction in Q2 of 2027 or by the end of [ April ] 2027. So we need to get that right. At the same time, the simultaneously addressing the stranded costs. And so really, the focus internally is how do we balance the short-term separation piece, but also making sure we're doing it in an effective way that our stranded cost elimination program is well underway. We have confidence that we can do both. But that is the only area that we are keeping -- and we're watching and making sure we could do both successfully on a go-forward basis.

Another good question you had was on the reinvestment piece to it. As I think about the business, there wasn't much overlap, but there was some entitlement between H&B and the Food Ingredients. This may involve some modest investment, okay? But it's small. It's -- when I think about it, it's CapEx related to some lab separations, maybe some commercial resources. But in the grand scheme of things, it's minimal, and the team is really, really focused. So when we think about the net number, the net number of the stranded cost number is something we're committing to and we're driving very hard to achieve.

Operator

The next question will go to the line of Salvator Tiano with KeyBanc.

Salvator Tiano

So just on Fragrance Ingredients, you have continued growth in Q3. Has anything changed fundamentally with regard to, I guess, the supply-demand backdrop that a year, 2 years ago was getting worse? Or is the growth still driven by Middle East disruptions? And if it's the latter, when do you expect things to normalize there?

Jon Erik Fyrwald

Thanks for the question, Sal. We continue to focus Fragrance Ingredient sales on the higher-value specialties, including naturals. And the strengthening pipeline that I talked about before, has started to deliver not only for Fine Fragrance and Consumer Fragrance, but also for Fragrance Ingredients. And we see that pipeline continuing to advance and will deliver more in '27 and beyond. So that's our strategy. We're turning it into execution, and that will continue. And that will, I believe, will lead to more consistent, higher levels of growth with better margins.

Operator

The next question will go to the line of Matthew DeYoe with Bank of America.

Matthew DeYoe

I just wanted to kind of take an inning check on Taste, right? Clearly, Erik, you've stepped in and started to reset the portfolio. We're now 3 quarters into pretty good organic growth traction and some pretty big disparities versus what we're seeing on like CPG trends. And so as you look at your sales channel and you engage your customers, like how much of this do you think is the majors just trying to innovate products in a tough tape? How much do you think is coming from smaller independent brands that are finding white space and maybe just any trends in particular you'd note? And what inning do you think you are in this kind of current innovation cycle?

Jon Erik Fyrwald

Thanks for the question, Matt. I think we're still early in the game, but we're doing well. We're off to some very good hits. What I would say is we continue to do well with the global key accounts. We just got really great recognition from a number of key accounts in their annual supplier events -- supplier partner events, that really makes us pleased and we've done really well on making sure that we stay on core lists or get on new core list that we want to be on. So all that's gone well with global key accounts, and their focus on innovation, clean label, high-protein, high-fiber, all that's been very favorable to our Taste business.

At the same time, [ Yuvraj ], the President of Taste and his team, have put a lot of emphasis on strengthening our capabilities with regionals and locals. And we've just had a really amazing event, our Tastepoint model had something called FirsTaste. And we had 135 customers in New Jersey that saw our new innovations and very, very excited about it. What was amazing is it started with dinner the night before and ended at 4 p.m. the next day, and not anybody left. I mean it was just a really great excitement. And so I feel that we're continuing to build on the strength that we've got with global key accounts, but we're also stepping up our game a lot with regionals and locals, and we're starting to see the benefits of that. And I think many innings to come for that.

Operator

The next question will go to the line of Kristen Owen with Oppenheimer.

Kristen Owen

Somewhat I have a follow-up on that last one. Erik, I think this is the third quarter in which you've talked about new wins. I'm wondering if you can just expand on those new wins. And just given the reinvestment in innovation over the last few years, if there's any way to quantify the percentage of growth or maybe profitability coming from those new products, I'm thinking in the form of a vitality index or something like that.

Jon Erik Fyrwald

Yes. So the new wins have been very exciting. We've had some great new wins in Fine Fragrance, where there's a great dynamic in that industry. We've been winning with naturals, with modulation, with a lot of the tailwind opportunities where our customers are looking for better innovation. Scent with Consumer Fragrances. The consumer fragrance companies want to grow again, and they see the scent as being a critical enabler of that growth. So our great perfumers in both Fine and in Consumer Fragrance are helping make that happen. Our new innovation is helping make that happen. And our great flavors in Taste and the innovation that Adam Janczuk and the R&D team are delivering to the flavors are also making that happen.

What's really great is I spent a lot of time with customers, especially with global key accounts, but also with a number of regionals and locals. They're all looking for innovation, and they love the passion of IFFers to work with them, to bring great innovation so that we're working together to bring products that customers love and benefit customers. And so I just think there's a lot going on in that area. Can I quantify it? I can tell you that a lot of our growth is coming from the new wins, and the new wins are coming at the base or higher margins, and that will continue. And we're measuring it also, and we're doing a better and better job of measuring the commercial pipeline and the innovation pipelines, and they're growing. And that will -- so that will continue to give us confidence for 2027 and beyond.

Operator

The next question will go to the line of Jeff Zekauskas with JPMorgan.

Jeffrey Zekauskas

When you look out over the next well over 15 months, do you think that the fragrances market is growing faster than flavors or flavors faster than fragrances? How would you compare the growth in the 2 businesses?

And then for Mike, when you look at accounts payable, they seem to be moving down and limiting your free cash flow. Are payables going to go up in the fourth quarter? Or are they going to stay low?

Jon Erik Fyrwald

Thanks for the question, Jeff. I'll take the first piece, and that's the Scent and Taste growth rates, I believe, will continue to be solid. And we've guided to -- in a normalized environment, the 4% to 6% top line range, I see that as doable. I see it is doable for both businesses and across Health & Biosciences as well. So I think that the market will continue to be strong for both Scent and Taste.

Michael Deveau

Yes. Great. And maybe I'll take the payables piece, Jeff. And maybe to start, this year, we put into our incentive compensation, a definition of free cash flow that we have, which is EBITDA minus change in net working capital minus CapEx over -- or divided by EBITDA. So team is doing a really good job at managing that number. When I look across all the elements of the core working capital pieces, we are seeing strong improvements.

Specifically to your point, when we look at the payables piece, we made some good progress this year. I would assume that, that number is probably flattish as we go into the fourth quarter, as some of the impact of the stand related to food ingredients, may require us to prepay some invoices to ensure we have a successful [ stand ]. And so I'm holding in my head, roughly flat at the end of the day. But going forward, that is probably our biggest area of improvement we can really drive, is how do we actually extend our payment terms with our customers overall. So fully focused, fully working on that. And I think that's a big part of the IFF story going forward is just improving cash dynamic as we move past the Food Ingredients business divestiture.

Operator

Our final question will go to the line of Chris Parkinson with Wolfe Research.

Harris Fein

Growth across the enzymes portfolio doesn't necessarily -- at least through some of your peers, doesn't seem necessarily uniform right now. So I'd love to hear your perspectives on kind of the varying substrates of what you're seeing in your portfolio across F&B, nutrition, grain processing, so on and so forth? And just how you think these trends are going to further evolve into '27? Just any considerations would be greatly appreciated.

Jon Erik Fyrwald

Thanks for the question, Chris. I see -- or we see Food Biosciences continuing to grow high single digits, very strong. And I would say across our enzymes portfolio, solid growth. The Health is the challenged area. We've discussed that. We've covered it. We're working hard on turning that around in a very tough market, but we're making progress with the commercial capability and the innovation, internal and external. We've got a great team. Leticia Gonçalves and her team are really strong. They're focused, and they're going to make sure that we deliver, as we say we're going to deliver. And I'm very pleased with the progress that we're making, and I think you'll see that in the future.

Operator

With that, we will conclude the Q&A session. I would now like to pass the conference back over to you, Erik, for any additional remarks.

Jon Erik Fyrwald

Yes. I just want to close by thanking you all for joining. I want to say that I think we've made a lot of progress on getting the company to be what we want to be, which is high innovation, high value, less cyclical, high cash flow businesses. And we will close the Food Ingredients transaction by the second quarter of next year. And with that, we'll be highly focused -- total focus will be on the remaining 3 businesses. And I think that total focus will enable us to deliver very strong results. And I think we've got a great team in place right now. We just had our engagement score results for the year, and they've continued to increase. They were very low a few years ago. They've gone up consistently over the last 3 years and now are very high despite a lot of work that's going on to separate Food Ingredients and the other businesses that we've separated and sold. So I'm very pleased with the progress. I think the best is yet to come, and I just want to thank all of our employees and our customers for being there and enabling us to unleash the potential of IFF that's starting to happen. Thank you.

Operator

Thank you, Erik. That concludes today's conference call. Thank you for your participation, and I hope you enjoy the rest of your day.