At this time I would like to welcome everyone to the International Flavors & Fragrances second quarter 2009 Earnings Call. (Operator Instructions), I would now like to introduce Michael DeVeau, Investor Relations Manager. You may begin.

Thank you, operator and thanks everyone for joining us this morning. With me on the call is Rob Amen, Chairman and CEO; and Kevin Berryman, Executive Vice President and CFO. Our call today is being will recorded and will be available for playback on our website at iff.com. We are also broadcasting the call live on our website. Please keep in mind that during this call we may make forward-looking statements about the company's performance. These statements are based on how we see things today so they may contain elements of uncertainty. For additional information concerning factors that could cause actually results to differ materially from the forward-looking statements I ask you to refer to our cautionary statement and risk factors contained in today's press release and on IFF's website at SEC filings. Some of today's prepared remarks will exclude those items that affect comparability. These items laid out in our non-GAAP reconciliations, which are also available under the website of IFF. With that let me turn the call over to Rob.

Thank you, Mike, and thank you, [Miranda]. Good morning, everyone. I'm pleased to have a couple of new IFFers joining me today. You've just heard from Michael DeVeau, who recently joined us in the Investor Relations job. We're happy Michael has joined us. Equally I'm pleased to have with me Kevin Berryman, our Executive Vice President and CFO. Kevin joined IFF in May after a 25-year career with [First Carnation] and then Nestle. During his career at Nestle he served as the CFO of Purina and served Nestle at corporate office as Group Controller. Kevin brings tremendous talent, energy, and experience to IFF, Kevin welcome. Let me turn to comments on our second quarter. Kevin will follow with a more in-depth analysis of the financial results and then I'll wrap it up at the end. First, turning to our Flavors business. While the Flavors business unit progressed nicely this quarter, sales were up only slightly versus a year ago. However, the sales increase in the second quarter 2008 was up 8% in local terms. The largest quarterly increase of any quarter since the business unit was established in 2007. So I believe being up only slightly is very positive in this setting. Growth was reported nicely in Asia, Latin America, and in North America. Europe was the only region not reporting growth. The sales growth importantly was driven by new wins and higher volumes in existing products, with Europe's weakness being the only offset. Very importantly, operating margins in this business improved 60 basis points as a result of the wins, price adjustments, cost containment, and offset by higher material costs and a weaker product mix. I'm certainly pleased with the progress our flavor team has made, Flavor has been and remains on a path of success. Fragrance business, well,…

Thanks, Rob. Good morning, everyone. I'd like to start out by saying I am very excited to be here at IFF. While the environment is a challenging one, I'm encouraged by the actions that Rob and his leadership team have taken over the last 12 months that are now beginning to show traction. I look forward to building on their achievements by adding value through business partnering, providing transparency, improving discipline in our processes and providing strong leadership to the finance organization. Having spent a long time in the food industry, I understand the value proposition that IFF can provide to the consumer package goods companies. As a result, I am convinced that the organization will continue to manage through the current environment and be even better positioned for future growth and margin expansion. That said I would like to spend some time providing you with additional insight into our second-quarter performance. To start, it is clear that our financial results are indicative that we are operating in a tough business environment. Our top line sales were impacted resulting in local currency and reported sales growth of minus 4% and minus 11% respectively. The resulting pressure on margins was very real as our operating profit margins fell by 140 basis points to 15.1% on an adjusted basis. However, our increased focus on costs and productivity initiatives has helped provide a sequential improvement in both operating profit and operating margin versus the first quarter. We have seen controllable costs decrease, which will help support improved margin leverage as we look to see future growth. This more focused effort against cost discipline has allowed us to help mitigate some of the short-term margin pressures, but more importantly, it has provided the company additional flexibility to maintain the necessary level of growth investments…

Thanks, Kevin. The external environment has been tough for a long time, really since the end of 2007. And that environment has presented us with many challenges. Inventory corrections and weak demand in Fine Fragrance, sharp product and materials input costs, volatile and adverse currency shifts. These were the drags on the margins we've suffered for several quarters. Our margin recovery initiatives have come along. Perhaps with an unattractive lag most especially in pricing, but they have come. It is clear these initiatives are now having a positive impact, which we will continue and become increasingly positive. I'm pleased with the balanced progress we're making. We continue to attract and develop the best talent. We continue to demonstrate our commitment to our customers by investing in greater facilities and production capacity needed to consistently supply them with the flavor and fragrance creations they desire. And we have done this while reducing costs and improving internal efficiencies. I believe we're on the path to deliver improved sales margins and earnings over the coming quarters. That said, we will continue to look for additional opportunities to improve our performance. That job's not over. Now Kevin and I will be happy to take questions. [Miranda], if you could help us with the questioning.

(Operator Instructions) We'll hear first from Jeff Zekauskas with JPMorgan.

In terms of the local currency trends, what was sort of noticeable in the quarter is that on a sequential basis pretty much in all regions with the exception of greater Asia the trends real have become worse sequentially. So when I look at local currency growth particularly in the fragrance area they've just become weaker which is sort of different from what your larger competitor reported. Are there things that we should keep in mind why that is and why there's such a disconnect, and when you discussed improving local trends going forward, does that really be positive local currency growth or just a reduction at a slower rate?

I'm sorry, Silke. Let's back up and try to handle the first question. Let me paraphrase it. Why the difference in our local currency versus competitor's particularly in fragrance?

Yes. And the sequential weakening.

Well. I mean, we are going to be different. It's not lockstep. I haven't, to be honest with you, I haven't spent the time and analyzed exactly what they've done in each region. I think there's a difference in product mix and market share that's going to drive things. I mean that's an element of it, but I don't understand what's going on there in numbers. So I can't tell you why we're different from them. I know what's going on with us and our customers. You has a second part to your question.

The second part of the question was, does improving local currency trends in the future quarters, for the third and fourth quarter. Does that really mean positive local currency growth or would that mean that growth is slowing at, you know not as steep a rate.

Well, we don't give firm guidance, and we've struggled with this. We said it for a while. On balance when we take a look at the total enterprise and we take a look at the orders in hand, as Kevin alluded, we did see some improvement as we came to the close in the fourth quarter, and seeing and knowing what we know today for the third quarter, we think that local currency sales largely, plus or minus a little bit, should be flat for the enterprise for the third quarter. There's a chance it will be a little positive. There's a little bit of chance it could be a little lower than that. And that would be the first local currency flat or non-negative comparison in 2009. That is still there is a lot of this quarter left and a lot of uncertainty in the world. But we are feeling like our local currency sales are on a more positive trend.

We'll hear next from John Roberts with Buckingham Research.

In the flavors area you commented on two specific trends that I was hoping you could elaborate on. The deceleration in North American flavors seem to be beverage related. I don’t know what's specifically going on there. And then the European deceleration, they were down one last quarter and they were down five this quarter in local currency. You talked about inventory de-stocking, I think, and I don't know if in a recession is there's less processed food consumption or packaged food consumption? I would think we'd be seeing the same trend in the US that we we're seeing it in Europe.

Let me be sure we're on the same pages. Flavors in North America --

Flavors in North America I thought was up 1%. It was up 6% last quarter. So it decelerated?

Yes. Again, it was also versus a pretty good quarter a year ago. So, one quarter variation, it's hard to tackle that. I think the flavors unit has done a superb job in North America if you look back over several quarters. They've done very nicely, and I don't think there's, I'd read too much into a change in trend. I think North America there had been some inventory corrections. We did see early in the quarter some drawdown by customers in April and then a very nice recovery in May and June. So I wouldn't read and there's no significant change in North American trend.

Well, the press release talks specifically about volume weakness in the beverage category?

Broadly yes. Beverage has been weaker for us than the other parts of our mix and we clearly in savory and dairy those were stronger. Beverage was weaker.

Is that whether. I don't cover the beverage companies themselves. But …

It's a combination. I think its total beverage unit consumption in North America as well as the external impact of the cooler, damper weather. But I think if you read a number of the reports from the big beverage players, total consumption in North America was off a meaningful amount.

We'll go next to Lauren Lieberman with Barclays Capital.

First question was just on customer mix given how much stronger Latin America and Asia were than the developed markets. I was just curious if the source of strength there was largely multinational customers, therefore its more regionals where those players may actually be gaining share?

The performance overall does shift region-by-region. In Latin America we did see very strong performance on the part of the key regional players. They did a nice job in both businesses. In other parts of the world, the global did quite well.

So Asia it was more as a global and Latin America was more as a regional? You had so to …

Yes. I Latin America the key drivers to our growth was the performance of some of the key regional markets.

The regional players …

The regional players.

Okay. And Asia was more of the global?

Yes.

And that's still a bigger percentage of your business in Asia is with the global players?

I've got to think about it. India, China, Japan, I would say yes, the global is probably more than half.

Okay. Is that the same in Latin America, or is it reverse again. The regionals are a bigger percentage of your business?

In Latin America the regionals would be the more dominant share of our mix.

Okay. Great. And then the other thing I wanted to follow-up on was, because I had noticed R&D down as a percentage of sales. I know the goal long-term is to get close to that 8% level. But with top line down both local currency and including currency, this wouldn't have really been the quarter I'd expect to see sort of positive leverage on that line. And then that coupled with the comments of the pipeline or at least the new briefs you're working on is bigger than ever and that’s a negative for your cost structure right now, but does it really fit with what we're seeing on the R&D line. So is that sort of delayed, is that pipeline worth something we'll see reflected more in the cost structure in the next two quarters, or was it absorbed this quarter, as well?

Well, let me break it down for you. In terms of the big R, that's largely the United States, there's a little on kind of couple of centers in Europe. So there is some FX impact but not material, and we continue to be dedicated to our big R. A substantial part of R&D is the applications and development work. Now, you're right. We have the dichotomy of an increased project pipeline that we're working on. But what we've been working on is how do we deal with that and do it more efficiently. So we've tried, we've delayed a little bit, we've taken out some positions, we're trying to reduce some of the external purchased services, but we're trying to do more and spend less while we're doing it. And actually I have to compliment the two business leaders. I think they did a great job with a heavier pipeline for actually achieving that with fewer people and at a lower cost. Kevin, want to add.

Just another comment, Lauren, back to your regional question. Actually if you start to look at the total mix of the portfolio today, LATAM is actually becoming a player and challenging the North American region, Asia is challenging for number two regional position behind Europe. So we're starting to see a blend of the portfolio more aligned with where the growth areas are.

(Operator Instructions) We'll hear next from Edward Yang with Oppenheimer & Co. Edward Yang - Oppenheimer & Co: My first question on interest expense, it was a bit lower than I expected, and so what would be a good run rate for the third quarter? And on the CapEx side, that was a bit below as well, and is the $80 million guidance still good for that?

I would say that the interest expense were kind of in a figure that is relatively close to our second quarter figures. So $13 million, $14 million is a good run rate going forward. We eliminated swap in the end of the first quarter so effectively that has enabled us to reduce some interest cost. Certainly rates are to the extent that there is some short-term moneys out there, that is certainly working in our favor, as well. As it relates to kind of the capital, we had talked on the $80 million figure in the past. I think we're thinking at this particular point in time it's going to be lower than that. I would say probably somewhere $70 million, maybe a little bit higher. But I think that's probably the direction we would give you at this particular point of time. Edward Yang - Oppenheimer & Co: Okay. Thank you, Kevin, for that. On the fragrance side, you noted that you saw improving trends in fine fragrances as you were leaving the quarter. Could you elaborate on that? Also just as a reminder, that business first started showing negative local currency growth in 4Q '07 and then it started improving and then it got worse again. What was behind that? Was that just all economy related and so again, just would appreciate some color around that?

When you take a look at fine fragrance, you have to put it in longer context. The Christmas season of 2007 was very weak which third and fourth quarter fine fragrance in '07 was actually pretty strong. And that led to a substantial inventory correction that was noted in the first and second quarters of '08. It somewhat flattened out in the third quarter and was slightly positive, I think, that’s strictly off the top of my head, flattish in the fourth quarter. We again, obviously, in 2008 had a very disappointing Christmas retail season and that triggered another massive inventory correction. The decline you're seeing in fine fragrance is a combination of reduced retail demand and a substantial contraction on the part of this entire supply chain from our customers and distributors. So we are starting to see evidence that one might conclude that inventory correction is over. But you never know that until you've gone far enough to see that it's bounced. Inventories at many large fine fragrance companies are extremely low. However, I think it's impossible to estimate what the retailers' demand is going to be for some upcoming Christmas season. And that's going to have a big part in with the demand over the next few months. So yes, we saw some improvement in the end of June, and we're seeing it currently. But I'm really hesitant to read too much into it because of the risk to the Christmas season and the volatility of that to the total demand. Edward Yang - Oppenheimer & Co: So Rob, which quarter sees the most inventory reorders for the upcoming Christmas season? Is it the third quarter or the fourth quarter for you?

Third quarter. It's very, very little opportunity to get things shipped out from us in October because of the long supply chain, you know, glass, packaging, et cetera, to get it packed to get it to a retailer and get it sold. So most of the Christmas material is done late second quarter into the third quarter.

We'll take a follow-up question from John Roberts with Buckingham Research.

Thanks. The deceleration that you saw in the fragrance ingredients area, North American down nine and it was up 13% I think last quarter. And you saw declines in both Latin America and Asia where they were up before. How much of that is related to the fine fragrance end markets there? So is it the same effect we're seeing only over in the ingredients side?

Well, I can't tell you with great certainty because we sell it to fragrance companies. They don't always tell us what they're using it in. You've heard me in the past, I always look at ingredients over a longer period. One quarter alone, I think it was last year, the first quarter was weak, the second quarter was strong, you kind of take a look at it. And if you look at ingredients in total over the six months this year being down around 9%, that deal's about right with the overall market. I do think there has been inventory correction on the part of all of us. Just as we reported our inventories are down. I believe other fragrance houses are doing the same thing. So it's not all consumption, I think there is supply chain adjustment in there.

Then secondly, in the Fine and Beauty Care business in Asia, you saw 7% growth, but I think that's the low ever level you've seen in years in any quarter. It was down from what had been a teen's growth rate in even the prior quarters which were recessionary. And I don't think you have much Japanese exposure there. I don't think the Fine Fragrance business is very big in Japan. So I'm kind of surprised that the quicker deceleration. Is it an income (inaudible) China I wouldn't have thought would have decelerated for example.

I'm looking second quarter was up 10% in local currency. Fine and Beauty for which is -- I am given the economies, I think that's pretty respectable. That's China, that's Japan, that's India, Indonesia, I think a 10% growth in those economies given what's going on, that's fine, but that's a lot of hair care, toiletries. Actually I think that number's impressive.

Okay. And lastly, I thought you had lost some business in North America in the fabric softener area and then regained it. Is that enough of a switch that in either the third or fourth quarter we'll see North America functional fragrance flip to a positive comp?

I'm not sure we'll get to positive comp in North America in the third quarter. It's going to take a few things. The North American market right now is not being influenced by the fabric as much as being hair care and some other things. Consumers are viewing that in a more discretionary way. You can see that in some of our customers' reports. The hair care business has been soft. That has had a big impact. So there's a couple of different things going on in North America functional.

(Operator Instructions) We'll take a follow-up from Jeff Zekauskas with JPMorgan.

Can you break out in the quarter what volume mix and price was as part of the local currency growth for the company as a whole?

I don't think we've done that, and I don't think we're going to start on this call, Silka. That sort of gets us into a whole other issue. But as you may imagine, volume was a slight negative. And mix net, net, net was probably when you combine what we've talked about in beverage and fine, mix was probably negative for the enterprise. So, pricing and other initiatives were positive.

Are prices sequentially increasing, are they up year-over-year, and should they continue to increase? How should that trend?

Prices would be up year-over-year and gently rising sequentially. Go ahead, Kevin?

It (inaudible) effectively there's about 2.5%, 3% in terms of pricing. Now that varies by the category and what's going on specifically relative to materials. But that is a number that is somewhat consistent with kind of the first quarter.

We have no further questions from the phone audience at this time. I'll turn the conference back over to our speakers for any additional or closing remarks.

Thank you, [Miranda]. Thank you for your time. Clearly now you've been introduced to Michael DeVeau and Kevin. I think all of you have met the two gentlemen. And I encourage you to follow-up with them afterwards. And I really do appreciate the time. And I look to speaking with you individually in the weeks and months ahead. Thanks very much.

Ladies and gentlemen, that does conclude today's conference call. We'd like to thank you all for your participation.