At this time, I would like to welcome everyone to the IFF Fourth Quarter and Full Year 2020 Earnings Conference Call. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. I would 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 2020 conference call. Yesterday evening, we issued a press release announcing our financial results and outlook for 2021. 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 please take a moment to review our forward-looking statements..

Thank you, Mike, and thank you, all who have joined us today as close to tiptoe and legacy IFF and begin a new journey with N&B. We will begin by sharing a detailed look into all fourth quarter and the full year 2020 results, and then Rustom and I will highlight the go forward outlook and opportunity for the new IFF.

I'm really excited and proud to say that as of February 1, we have officially completed our merger with DuPont N&B. Our teams have hit the ground running, establishing our new company, as an innovation leader and the global value chain for consumer goods and commercial products.

For the close of the N&B transaction, we also unveiled a new brand identity and purpose intended to unify our organization and best position all divisions for success. As a purpose driven enterprise, we share a mission to build from strengths and transform our industry. We are now squarely focused on execution.

Building on recent performance to leverage the exciting capabilities and brought our customer base of our new company. I'm confident that the direction that we are moving and the opportunity ahead of us will lead to accelerated growth and improve profitability as we generate strong value creation and total shareholder return.

Beginning with Slide 6, I would like to recap what was truly a remarkable 2020. Amidst an unprecedented pandemic, the challenge to our global organization, we delivered solid financial results, while embarking on a transformational journey to create a new industry leader together with DuPont N&B. .

Thank you, Andreas. I’d only cover the P&L high points on this slide and get into additional detail as we go through the following several slides. In the fourth quarter, IFF generated $1.3 billion in sales, down 2% year-over-year on a currency neutral basis.

When excluding the roughly $50 million impact of 2019s 53rd week, a comparable currency neutral growth was plus 2%. And as I'll explain on the next slide up approximately 4% counting foreign exchange related price changes as appears in many CPGs disclose..

Thank you, Rustom. Turning to Slide 17, let’s focus on 2021 and the new IFF with the N&B business. Our team’s executed well on the tremendous integration planning for the transformational combination, despite working remotely due to COVID-19.

This integration planning effort more than a year long has provided an opportunity to create the right team and operating model needed to secure a global leadership position.

It has been driven by the lessons we have learned in past integrations across both organizations, running our plans and practical experience that will enable near-term execution. We set out an aggressive timeline in 2019 to close and complete integration planning in 2020. A global pandemic only challenged us even further.

But I’m very pleased to say that our teams work extraordinarily well together to compete every aspect out integration planning. I’m confident that the new IFF is ideally positioned to succeed.

With this planning complete, we can entirely focus on execution, delivering our commitment and realizing significant revenue cost synergies, resulting in significant value creation for shareholders for the years to come. Let’s move to Slide 18 and take a second and we focus on the value proposition of the new IFF.

Our new company is poised to realize significant value for all of our stakeholders. And these two highly complementary companies form a true innovation partner for all customers. The new IFF will be a force in shaping the future of our industry. Our R&D investment will be 1.5 times greater than our nearest sphere.

We will have number one or number two positions on core categories and nutrition, cultures, enzymes, probiotics, soy proteins, flavors and fragrances. This is coupled with a broadest and most diverse customer base in our industry more than 45,000 in total and about 48% of our annual sales from small, medium and private label customers.

We are well positioned to drive profitable growth for our shareholders. This allows us to enhance the value we can deliver to our customers in a very powerful way.

We can deliver value to customers in every interaction from leading product offerings to significant benefits of speed to market and supply chain simplification as we deliver market leading integrated solutions.

I think it is important to remember that while the N&B transaction is a culminating and transformational move, it is completely consistent how we have been evolving the portfolio over the past five years. Our friendly focused on positioning the company for where the industry is going, not where it has been.

As we acquired more naturals, more regional supply chains, reaching smaller customers and increasing technology and science that innovation. Actions like Frutarom, Lucas Meyer, Ottens Flavors and others were important foundational steps as we executed this strategy.

As we look ahead, we are pleased we have the most complete portfolio in the business, while portfolio may change around the edges. It is complete and gives us a right base to grow and the right assets to drives a financial results you see from our long-term targets.

Put simply the new IFF will be the strongest part that to customers worldwide to corporate essential solutions for on-trend innovation. Now to Slide 19, I would like to emphasize the long-term value creation potential we have seen for IFF. Our new company has substantial synergy opportunities that will drive growth and expand margins.

So our integration planning we confirmed, the run rate revenue synergy expectation at approximately $400 million by 2024 was a contribution of at least $145 million of EBITDA by that time. In addition, we expect to achieve meaningful cost savings, including a runway cost synergy expectation of $300 million by the end of 2023.

We expect that execution on our plan will unlock about $50 million in EBITDA contribution in 2021. I think it’s important to say that any combination is not just about synergies, but also too strong and leading based businesses.

Our leaders across legacy IFF and legacy N&B businesses are committed to running every part of this business, both space business and combined to use superior results. This requires a mindset of continuous improvement and operational excellence that we’re embracing across the organization.

It is critical to underscore that with a comprehensive structure in place to track our progress against the identified objectives. At the center of our discussion will be synergy realization, where we’ll be track diligently, including the one-time costs in both expense and capital.

Our hope is to highlight on a continuous basis, all value creation leavers to provide you with a critical how component of our value creation story. And in the end, while we are focused on synergy realization, success will not be defined just as that.

It will be the cumulative results where synergies are edited to base business performance for a stronger total P&L. On Slide 20, I want to highlight the actions that will be immediately taken to begin the execution.

One of the most questions we get from investors is not, what will you deliver, but instead, how will you actually do it? As you can imagine, synergy capture is all about the how.

And as we mentioned on January 11, there are 85 separate initiatives behind the $300 million cost savings that in our plan on the cost side and another several initiatives on the revenue side. We tried to give you a flavor for the type of actions that are part of these initiatives.

In terms of revenue synergies, we’ve engaged with our top global and regional customers to introduce joint portfolio and capabilities accelerated co-development partnership with global customers, activated cost division on innovation and collaboration in R&D and launch combined commercial excellence and integrated solution teams.

At a high level, I would characterize the cost actions as follow. First, whether it’s the publication we elevate the duplication, you can imagine across two global companies, there’s a lot of duplication in back office and admin functions. Second, we look to align our cost structure with best in class PS, where it is comparable.

We have undertaken benchmarking cross functions like G&A, which gives us a tangible target for improvement. No two organizations identical. So we use this as a goal rather than prescription. So it – whether it’s efficiency, we spread the benefits of dollars, spend across a larger base. Let me give you an example.

Also, organizations invest in R&D, but can now leverage across double the categories and customers. This is powerful and shows you the benefit of global scale for supporting cutting edge science investments. First, I would report all the power of centralized services.

We have had powered regional business leaders, who drive their P&Ls, but they have access to the best in class global shared service centers in areas like HR, finance and procurement, where there’s a tangible benefit to scale and combined resources.

And finally, we have set all of our incentive compensation metrics to reflect in align with our waste business and integration objectives. I really hope this gives you some flavor for the how, we now know the targets we want to deliver and we have told you our long-term goals. So over the coming quarters focus will be very much on these actions.

Let’s turn to Slide 21. The new IFF is set to deliver a best in class financial profile and maximize value for our shareholders. This slide summarizes our long-term outlook, which we introduce to investors at the beginning of this year.

From a revenue perspective, we expect continued organic sales growth of approximately 4% to 5% over the next few years, led by our unrivaled product and solutions portfolio, which is set to benefit from our industry leading R&D programs.

We also expect to see meaningful operating margin improvements for IFF, including an estimated adjusted EBITDA margin of approximately 26% in 2023 up around 400 basis points from our 2020 performance. The new IFF will continue to generate strong free cash flows and we expect a significant increase to approximately $2 billion in 2023.

As we pursue further gross, so our capital management and delevering, we remain – that will remain a core priority. We are targeting on those three times net debt to EBITDA ratio 24 to 36 months post-close and reaffirm our commitment to maintaining our investment grade rating.

Finishing on Slide 22, I would like to thank you all again for joining our call. Across the world, our teams have worked tirelessly throughout a difficult year to ensure IFF continue to serve our customers and deliver strong business results. Our full year financial results showcase the strengths of our portfolio and most importantly, our people.

So those challenging environment, we made tremendous progress on our transformational journey. The formation of the new IFF together with N&B has made us an even stronger company, better positioned to deliver value for our stakeholders. With the pre-integration process completed, it’s now time to execute.

We have the team and structures in place to ensure that our newly combined company will meet our financial and operating goals in order to shape the future of our industry and improve our world.

By global volatility is expected to persists, foundational commitment to our people, customers, communities and planet will remain unchanged as we look to strengthen and redefine our role as the industry leading ingredients and solutions partner.

I’m really thrilled by IFF exciting new chapter, and hope that you will join us on our pursuit to revolutionize the industry and deliver for customers, teams and shareholders. So before opening to questions, please note that our plan for Q&A today is to focus on our results and outlook and not to address questions about market rumors.

With that, I would now like to open the call for questions. Thank you..

And we’ll take our first question from Mark Astrachan with Stifel. Please go ahead. Your line is open..

Yes. Thanks and good morning everyone. I guess, one question two parts on the long-term – the new long-term targets. So on the sales growth piece, what gives confidence, you can achieve 4% to 5% organic growth when you haven’t achieved that level in recent years.

Or I should say even both businesses haven’t achieved that kind of growth in recent years you’re guiding, I think Rustom said 2% to 3% organic, something like that in year one. So how do you get there? And I guess also too, just mechanically, how much contribution from the change in FX accounting would add to that.

And on the same long-term targets, EBITDA margins – why the same confidence to achieve those margins, when EBITDA or EBITDA margin had been essentially flat over the last couple of years, despite cost synergies, legacy business productivity initiatives.

And I get the puts and takes in 2020, but your results have been below here’s from an EBITDA growth standpoint too, in recent years. So maybe if you could just touch on those, I appreciate it’s a long question, but it’s hopefully important..

Yes. Thank you, Mark. A very important question. I take the first piece and then I give it on the FX to Rustom. We are very confident that we are very much on track for the long-term targets. Let me explain why. You see that for example, Scent a very important division of ours has turned around quite significantly already in a very tough year, like 2020.

And we see good signs also early this year that this journey will continue. So we are basically here on very much on track. The second one is taste. And taste has a bit of a performance issue in the years 2019 and then reaching into 2020. But we have seen some sequential improvement and a good start to 2021 as well.

We have done all the actions we have to take to bring this division back on track. We have basically split the European region into Europe, Western Europe, Africa, Middle East to put more focus on the emerging markets and on the more mature markets.

We have put a lot of, let’s say, focus on integration efforts of the Frutarom organization, particularly in Europe last year. So fully integrated and we have restructured our go-to-market strategy and it looks like that we are starting to perform well. So I think that’s very confident on the legacy IFF side.

On N&B, I think it depends, you’ve seen a lot of pieces of the portfolio, which has a good growth profile, and we will continue and we should not underestimate that parts of the portfolio was also particular last year pressured by COVID. And that will help, at least in the second half of this year to come out of that.

And secondly, we have – certainly, we have seen actually good customer response as well on their portfolio. And in terms of recent wins. On top of it, we have the cross selling and integrated solutions, which will help us to increase our growth rate as well. So we are very confident that we can do it. On the EBITDA margin, we took on legacy IFF.

We took actions, we started, as I said, was Scent division or just on sales, but on EBITDA as well. We see good improvement. The same will happen on the taste side and actually I’m less worried about the N&B side, because there’s not actually a good EBITDA, let’s say increase of margins in the last couple of years.

With that, that I hand it over to Rustom to comment on FX days..

Thanks, Andrea. Hi, Mark. The guidance that we provided Mark was in dollars, right, as we rolled out, if you think back, basically if you look at the S-4 and then when we talked about the synergies additional revenue synergies that we expected. So as we FX is very hard to call.

I mean, we basically ran out the FX rates that we had as of the time we provided all those forward estimates. The new way of the new methodology, which we’ve talked about in any particular period and as we look back does give us a better growth rate.

It doesn’t change the overall actual dollars, right?.

Exactly..

Yes. I think Andreas covered everything else in your question there..

Thank you, Rustom..

And we’ll take our next question from Gunther Zechmann with Bernstein. Please go ahead. Your line is open..

Hi, good morning, Andreas. Good morning Rustom. Hi, Mike. That’s almost emotional for me that you changed the reporting to the way that the European TS disclose organic sales growth. So that’s a bit of a long failed wish.

Can I just clarify on your 2021 guidance, what is the organic component and how much do you bake in for FX pricing? I hear what you say Rustom about FX being difficult to predict, but maybe if we break it down to what is the volume expectation and what is the, call it, underlying pricing on the back of any cost inflation that you include in your 2021 guidance, please? And then I have a follow-up as well..

The underlying – the pricing, I mean, we do expect the raw material costs during the period. I mean, higher raw material costs and recovery of that is based into our pricing as well. So maybe I’ll address the FX part of it. I mean, if you think about, weighted average basket of our currencies, and we look at the biggest currencies for us the U.S.

dollar is the biggest, but the Euro/Danish krona, because that’s pretty much tied to the Euro. That’s the second biggest. It’s actually, when you put in the Danish krona, it’s about 27%. Okay. Those are the two big ones. And then the other is, I mean, the Reals and of the Japanese Yen, the Indian rupee or many others, right.

If we look to the weighted basket of those and if we look at the – what is in our basic budget this year was 2020 – 2021 versus 2020, it was about a 1% difference. That’s what we had. And then if you look at spot today, it’s actually running better than that from our perspective from revenue. So our expected 2021 growth rate remains about 3.5%.

That’s what we put out there, right? With a small contribution from synergies and no change to the S-4 and as you’ve seen from our January 2021 preliminary sales growth around 3%, we’ve started, we’ve started roughly in line with expectations..

Great, thanks. If I can just follow-up, what – can you talk us through the drivers positive and negative growth as you see 2021 as part of the guidance assumptions that you’ve made around COVID place..

First top of the year, we resumed that the – we would remain more or less the same broad macro impact on us. That’s on fine fragrance, food, et cetera – food service, et cetera, as the second part of last year of 2020. And we expect that we recover to the second half should be better..

Next we have Faiza Alwy with Deutsche Bank. Please go ahead. Your line is open..

Faiza, are you there? Okay, maybe operator, we can go to the next question..

Yes. Hi. Thank you. Good morning. So Andreas I know there are some activists who are more than the market, but I know, you can’t comment. Hello..

Hello? Yes, we can hear you..

Can you guys hear me?.

Yes, we can.

Can you go ahead? Faiza?.

Hello..

Okay. Now we hear again..

And we’ll move next with Matthew Deyoe with Bank of America. Please go ahead. Your line is open..

Good morning. So you’d said food service was down double digits on the quarter and on the gear. Can you be more specific? And we’ve seen a lot of European lockdown headlines as well. So is that the decelerated in 1Q.

And I guess more holistically, why didn’t taste ex-food service grow mid-single digits are better? What is keeping – what ex or excluding the food service businesses keeping growth and taste in maybe the 1% to 2% range versus closer to mid single digits?.

Yes. Let’s talk about the food service first and thank you for the question. So food service in general, we’ll come back certainly over the course of 2021 following up to the level of 2019, that we will achieve next year.

But we have seen actually a better start into January was down high single digit, which was much better than we have seen in the last year. I think that’s good despite the lockdowns in Europe. So it was driven by many of the other regions as well.

What was impacting a taste in general was probably also the customer structure, because we had probably more, smaller customers and mid-sized customers compared to some of the competitors. But we see no good recovery and a better pipeline of new projects coming in. And as we said, actually, the start into 2021 was very, very promising.

I hope that helps..

It does. And as we look at the Scent business in 2021, what do you expect, like, fine fragrance obviously has some pretty easy comps, as we move through the year, but consumer scent business could move the other way.

And how much room is there left to run on the new business wins? It seems like you made some very good traction in the back half of 2020..

Yes, no, absolutely. And as we see it for now, we triangulate that we are gaining market share here. And that has two effects. One is, as you touched on, it is certainly a COVID volume effect on personal wash and hygiene products, which we are taking fully and which is helping us to fill the growth.

But we have made three new core wins, maybe year and half ago and these core wins, we are winning and growing our business quite significantly, double-digit, in these three year counts. And this has now a critical mass that it gives us some tailwind into 2021.

So now the question is, will it stay a very strong business over the course of the year? And what we see right now? Yes, it will. We have started year-to-year very well as well. So we believe we will have good growth in 2022 as well on the consumer fragrance business, driven by the demand volume demand, but also by that’s very, very promising..

We’ll take our next question from Faiza Alwy with Deutsche Bank. Please go ahead. Your line is open..

Yes. Hi, thank you. Sorry about that before. I hope you guys can hear me now..

We can. Very clear..

Okay, great. So Andreas, there are some activist rumors in the market, but I know you can’t comment on. But I was hoping you could reflect on your tenure as CEO. In the last few years, IFF has underperformed peers.

So what do you think has driven that operating underperformance? Do you think you’ve been focused on the right customers and categories? Have you invested appropriately in R&D or maybe have you been too focused on M&A, sort of, is there anything you would have done differently over the last few years?.

Very good. Thank you, Faiza. First of all, when we started actually laying out or looking at our strategy in 2015, I think what went well, we had a very clear strategy, because the environment is changing or was changing. So we had different customer demands, maybe more integrated solutions, more demands for naturals.

We have seen that the smaller customers have taking a bigger share, and that adjacencies play a role, not just for integrated solutions, but in general to move the business forward. So I believe our strategy was very clear that that worked out very, very, very well.

And that has led to achieve when we look at the company back in 2014, it was slightly grow of $3 billion in sales with the limited offering that point in time, and now we're in an $11 billion company with a very broad offering. And in many instances, we are number one or number two in the defined categories.

I think so our strategy and our response to the changing market was very, very good. We have basically positioned ourselves really to deliver very significant growth over the years to come. If you look at things, which might have gone better, we can touch on food or my – I think what went well is it was strategically the right move.

We have good synergies on the cost side. I would say top line was challenged for many reasons. I think we learned our lesson on compliance certainly. And we probably could have integrated faster the European organization, which has done right now. I think that was important.

And then in between, we certainly had the crisis in Scent we supply, and we have to turn around the business and I think that worked out very well. So in balance, I think the right strategy, the right moves, on the food side, I think some areas on the top line where some of it is compliance, let's say related, but we fixed it.

I think we – and we fixed it fast, maybe faster than others would have done it. And we finally have integrated the commercial structure here as well. So that's all what look at the next – at the last five years, and I think we are tremendously good positioned for the next couple of years right now.

And I can promise you there are certainly no big acquisitions coming in the next couple of years. It's all focused about execution and shareholder value. That's very clear, because we have everything we need..

We’ll move next with Jeff Zekauskas with JPMorgan. Please go ahead. Your line is open..

Thanks very much. In terms of the effects of COVID on the DuPont business, in your business, you said that roughly 15% of your revenues were down 15%. So there's a 2.25% penalty.

Is the penalty for the DuPont business bigger or smaller? And secondly, were you a customer of DuPont previous to the merger? And if you were, was it by a lot and are the other flavor and fragrance companies customers of DuPont, Chevy and Symrise..

I can take the customer piece first and then maybe Rustom you take the first part of it. So we had some customer relationships, but very, very little. The other flavors and fragrance companies had some business with legacy DuPont, because legacy DuPont was buying some flavors as well, but to a very, very limited demand.

I think that's not another big movement, but Rustom if you could take the first piece of Jeff’s question, please..

Sure. It's roughly about 20% as we're getting to the numbers of N&Bs business was also impacted by COVID, Jeff. And it varied the impacts on different areas with biorefineries, microbials, food service, they raised a little bit, but that brought 15% reduction number. I would think at this point, I'd say it's in the ballpark. .

Our next question from Ghansham Panjabi with Baird. Please go ahead. .

Hey guys, good morning. .

Good morning..

Thanks for putting me in. Just first off on Slide 14, where you listed out many of your 2021 assumptions. I'm just hoping you can just kind of help us with the tax rates guidance for 2021 CapEx as well on a pro forma basis.

And also the EPS waiting between the first half and second half, just given your comments about the first half being challenging relative to the current COVID environment. Thanks so much..

Rustom?.

Yes. On the tax rates, I mean look, we've got a sense of how and what the taxes are, the one more time before we come out with that, right. Tax rates because remember DuPont N&B is a carve out. It's a carve out coming out of DuPont and so a whole lot of entities set up at numbers and work to be done.

Their tax rate is definitely higher than our tax rate, which was in the year, it was 17.5% rate effective tax rate DuPont’s is higher. We’ll come back with more details there on that.

Regarding the – your questions on the EPS, we actually focused on EBITDA more as the metric that we'd like to think gives us all the best from our owner's perspective, gives us the most clearest, most transparent ways of looking at it, sales and EBITDA performance on the business.

And because we haven't actually provided guidance on EBITDA for the first quarter, I'd rather not sort of answer the – how the ask breakout, if you don't mind..

I think Rustom, the question on CapEx for the full year expectation….

No change at all from what was in our S-4 that we had out there as it was like in the high 400s, 465, I think 470, somewhere about there. We have – we expected specifically $235 million from the N&B side and $230 million from ours. Sorry, missed, I forgot that one..

We’ll move next with Lauren Lieberman with Barclays. Please go ahead. .

Great. Thanks. Good morning. .

Hey, good morning, Lauren..

Hi, so two questions. One was more a technicality is just to understand on the long-term target of 4% to 5% FX neutral. Does that target need to change with the new methodology for revenue disclosure? Because inherently you're including some effects driven pricing in that. So I just wanted to make sure I understand that.

And the second was just a longer-term question on that revenue target. And while I certainly appreciate taking a more conservative view and leaving room for delivery on synergies and so on to provide upside.

I just wonder what that implies about your view on market growth, because with this transaction and with the objective of creating a different business model for the industry, your long-term revenue targets are sort of what they were before.

And I'm just wondering how that relates to your view on market growth, because it just seems like a lot of work to sort of grow at the same pace you were targeting before. Thanks..

Let me Lauren I take the second piece and then I handed over to Rustom on the first piece. So listen, the revenue target and we were discussing it internally a lot.

The issue right now for us is in this COVID period, we have certainly for 2021, let's say time for a slower start, because as Rustom said for the first half of the year, it's still a COVID time was a lockdown in Europe. So we take it a bit more carefully before we go full force.

We believe that the market grows will be impacted this year, in particularly the first six months. So that makes – make certain the on, let's say for a slower start.

But looking further, we are actually pretty bullish, because if you take the average 4% to 5% for the following years, we had 5% and that's actually is for the two combined companies quite a nice and good target to go. And it's certainly above the average, both organizations that have done in the last two or three years. So I feel good about it.

And certainly it is the focus of the execution are very, let's say, very good exposure to some of the growth markets. And then certainly the cross selling opportunities, we are having and integrated solution, as you were mentioning, we are changing a bit the business model, yes.

So that's how we see it, but more to come look at the end of the day, in these volatile times, we have to move forward into a debt as fast as we can. Rustom, if you can take the first piece of the question long-term target. .

Yes. Lauren, we set our long-term targets in dollars and using effects assumptions back at the time if you said that, right, actual dollars. So the methodology that we use doesn't actually change.

So if the exact same situation applied over the last couple of years, our revenue dollars wouldn't have been any different, but the currency neutral growth would have been higher, right. Having said that, this is kind of interesting, if you took this morning's spot rates and assume that they extrapolated out for the entire year.

I mean they are a couple of percent higher than that weighted average that we talked about earlier to answer the earlier question, right, that maybe up a percent on the prior year.

So you have another couple of percent, and that would translate out into reported group, for sure, the actual reported dollar numbers would be higher, but I mean, you wouldn't see the currency neutral percentages coming off. So it's a complex kind of way of looking at it.

But the bigger point, if you're looking about the way we came up with the actual numbers back then, and this is the – I just want to reinforce that.

We had in the out years of our business growth from the base business without synergies and anything like that, growing at 3.5% to 4%, and that we think is realistic based on our Scent and Taste business, right. If I go back to that and the N&B business was in that ballpark as well. Okay, we think that's realistic going through those numbers.

You put in the synergies, which are like $140 million in 2022 revenue and $300 million in 2023 our expectation and that's how you get up to the 5% that number is out there..

Thank you, Rustom..

Operator, we’ll take one more, if that’s okey..

We'll take our next question from PJ Juvekar with Citi. Please go ahead. .

Yes. Hi, good morning. .

Hi, good morning, PJ..

Thank you for taking my question. Good, good. So I got a couple of related questions on margins. Your operating leverage in the business is not coming through. And what I mean by that is if you take your effects out on cost and currency, in Scent, your sales were up 3% profit was flat, in Taste sales was down 5% at profit was down 10%.

So why isn't the bottom line growing faster than the top line? That's my first question. And then I have a quick second question..

Okay.

Rustom?.

Bottom line actually is growing faster. If you looked at our full year number in Scent, you will find that it's a ballpark. The full year number for us is ballpark about 3% on revenue growth, right, the way you see where it goes and much that's on profit.

If you look at the – if you look at Scent in the quarter, we had and/or even quarter three for that matter, we've had very large increases coming through on that. So we are seeing that.

We have the – I think what you're factoring in, and this is an important point is on a full-year basis and also particularly in the fourth quarter, we had a large increase from AIP, right.

We had a AIP going up quite a annual incentive plan, because 2019 was so bad, that there was a credit in 2019 in the fourth quarter whereas this time there were costs put in that, that I think from memory was around $27 million just to swing. I think that….

Yes. And it’s important because it will not repeat actually in 2021, so that's a good thing.

Rustom?.

The other thing was – yes, sorry. .

Move on..

The other thing there is numbers is in the year is COVID. I mean COVID costs, not COVID the impact on revenue, which we've talked about at noseeum, but COVID the impact on cost.

I mean the extra air freight costs, the extra sea freight costs, the extra personal protective equipment for our people, the working different ships, the paying extra compensation by the time you factor all of those in it's probably about 20 – it was around $26 million of extra cost in the year as well. .

Thank you, Rustom..

And we have reached our allotted time. I would like to turn the floor back to Mr. Andreas for any closing remarks..

Yes. Thank you for the good question. We know we have a big line still for questions. We will continue with our one-on-ones was really good to talk to all of you and yes, more to come over the next couple of weeks and months. Thank you for that. Bye-bye. Thank you. .

Bye, everyone..

And this does conclude today’s conference. You may disconnect your line at any time and enjoy the rest of your day..