Good day and welcome to the International Flavors & Fragrances Fourth Quarter and Full Year 2007 Earnings Conference Call. [Operator Instructions] The speakers for today's call will be Rob Amen, Chairman and Chief Executive Officer, Doug Wetmore, Senior Vice President and Chief Financial Officer and Yvette Rudich, Director of Corporate Communications.

Hello and thank you for joining us today. During the course of this webcast we may make certain forward looking comments. The complete text regarding our forward looking statement is included in our press release and in our filings with the Securities and Exchange Commission. In addition during this webcast we may refer to certain non-GAAP financial measures in order to supplement our GAAP financial results. Examples of such measures include our discussion of local currency sales performance and applicable geographic region and earnings per share excluding restructuring charges and other nonrecurring items. We will leave this slide up for a moment to ensure that everyone has an opportunity to review it. Now, here is what we'll cover on today's call. Rob will speak about fourth quarter and full year 2007 highlights and provide a brief overview of the flavor and fragrance units. Doug will then present a fourth quarter and full year financial review. Following some closing comments from Rob on our 2007 achievements and 2008 perspective, we will take your questions. With that, I will now turn the call over to Rob.

Good morning, please excuse me, I'm fighting a cold so my voice may be weak but happily, the results were strong. The fourth quarter results for the corporation are highlighted on this slide and we are pleased with them. Sales were up 8% versus the fourth quarter of '06 plus 2% in local currency terms. Operating profits edged higher by 3% and earnings per share as adjusted. Doug will layout the adjustments shortly were up 18%. Turning to the fourth quarter, the fourth quarter was a record quarter for IFF. Our Flavors business had an outstanding performance. Sales were up 10% in local currency terms and they experienced growth in each region. The Fragrance business unit again had mixed results and they were impacted by the same issues we've discussed earlier with you this year. Fragrance ingredients' pricing which eroded early in 2007 continued through the year. It didn't erode any further but it was a year over year comparison negative. Equally, we continued to have poor performance in our fabric care activity. This quarter however, the weak retail setting did cause a notably weakness in North America and in Europe in our Fine Fragrance activities. I'm pleased though with the strength in Asia, Asia was up 11% overall showing strength in virtually every segment. Turning to the highlights for the year, 2007 was a year of solid progress. Each quarter we set a record of results for the quarter and we are pleased with that and of course if each quarters a record, the year turned out to be a record. These results are a clear demonstration of the global strength in consumer goods and of IFF’s ability to serve our customers. Turning to the businesses, the Flavors business which was put in place in January of '06 performed exceptionally well. The overall growth was excellent at 9%, we grew our share of market in each category. Profitability benefited from volume growth, mixed and good cost management. This business has built terrific momentum which will carry forward into the New Year. Two thousand seven was a tough year for our fragrance team, after a superb 2006 we struggled with weak performance in fabric care and adverse pricing of flavor ingredients and that impacted our margins. Fine and Beauty performed well until the fourth quarter. The fourth quarter ended a 15 consecutive quarters of growth for the Fine business. We don't have full data yet, but it appears the market for fine in the United States may have declined by 4% or 5% in volume terms so a weak season hurt our customers. I did see improvement in the Fragrance ingredients markets, which will have a positive impact in 2008 and I'll talk more about that later. For now I'd like Doug to go through the results with you in more detail.

Good morning everyone. As Rob mentioned earlier, Flavors continued to lead our sales growth in the fourth quarter growing 16% in dollars on a 10% local currency increase. The Fragrance sales increased 2% in Dollars on a 3% decline in local currency. The difference between the local currency growth and the Dollar performance was mainly attributable to the strength of the Euro and the Pound sterling compared to the Dollar. The Euro was 13% stronger than the 2006 fourth quarter while the Pound was 8% stronger. A basket of other currencies accounted for the remainder of the exchange effect. For the full year, Flavor sales grew 9% in local currency while fragrances achieved a 2% local currency increase. Now, I'll discuss the sales performance of the business units in a little more detail later. This chart depicts the percentage of growth in our consolidated sales in both local currency and reported Dollars since the first quarter of 2005. As is apparent from the graph, we went up against some challenging comparisons from a growth perspective in the third and fourth quarters of this year having grown 7% in local currency in a comparable 2006 periods. Turning to sales performance by geography, our growth was led by strong performances in the developing markets in greater Asia and Latin America. Latin American sales were particularly strong in Flavors increasing 42% in the quarter and increasing 27% for the full year. This Flavors performance follows an 11% increase in 2006 and a 21% increase in 2005. LATAM Fine Fragrance continued its strong growth increasing 4% in the quarter and 11% for the full year. In LATAM functional fragrance and ingredients were impacted by volume declines and ingredients were also impacted by some pricing pressure as we talked about in the past. Greater Asia…

Two thousand seven was a very good year for IFF. We accomplished a great deal. We think back to a year ago we put in place our new business structure and I'm pleased that it's in place and its working. Our teams have greater focus and are accountable for the results. The improved alignment with R&D is much better and we are starting to see the benefits of new materials and that is translating into sales and growth with key accounts. How do you measure success? IFF had a record year in sales and earnings; we are a stronger company today than we were a year ago. Our Flavors business is developing well ahead of our expectations, and Fine Fragrance, while they may have had a difficult fourth quarter, had another strong year of growth. Importantly we returned nearly $600 million to share owners via dividends and share buybacks. This slide shows the financial goals which we shared with you in October of 2006 and I'm pleased, we met or exceeded these goals. Now the goal for earnings per share growth, which we articulated in '06 which said ten plus percent improvement, we need to adjust that for the share buyback, so going forward we will show that to be something greater than 11%. Now that said, I believe that we will continue to deliver against these goals in 2008 and beyond. Two thousand seven was a good year, a year when we had good results but importantly, it was a year of foundation building. As I look ahead into 2008, clearly the economic risks are greater today than a year ago especially in the United States and Europe. However, I continue to believe IFF will, in 2008, meet its financial goals of growing sales by greater than 4% local currency terms and by growing earning per share on an adjusted basis by something greater than 11%. The US Market may slow, but the growth we are experiencing in the emerging world and other key markets is more than offsetting the potential to decline in the US. We've also taken a series of steps to restore our Fragrance ingredients margins which we will be able to demonstrate in the first quarter. The IFF management team believes we have the people, products and programs to make 2008 another successful year for all of our stakeholders. Now, Doug and I will be very happy to answer your questions.

[Operator Instructions] We'll take our first question from Michael Sison with Key Banc.

I appreciate your positive outlook there, Rob. In terms of the local currency growth heading into '08, you take a look at the Flavors business, it had a great year, do you think that business will continue to perform at that level, high single digits 8%, 9%? Maybe just a quick comment, should we think about Fragrances being sort of negative in the near term and in sort of turning positive by the year end?

Good questions, Mike. We don't really give specific guidance or forecast for a quarter or for the year, but I certainly expect that our Flavors business to continue to grow substantially and to grow share. There's no point in trying to nail a number on this call, but that chart that Doug shared with you that showed the quarterly progression, they seem to keep getting stronger, four, five, six, seven, eight, nine and 10% local currency growth. We don't necessarily expect that this is going to continue to accelerate, but they have so many good things going, they’ve won so much business. I think the Flavors business will have another very, very strong year and the first quarter should be in line with that. Fragrance, I think we are going to turn the curve in Fragrance in a more positive way in the first quarter led in part by Fragrance Ingredients. I really am as much of a student of what is going to go onto the markets domestically as anybody it's hard for me to forecast it. I do expect the US retail market for Fine Fragrance is probably going to be challenging for the time being. That said, the growth in Functional, the growth in Fragrance Ingredients, and overall the growth in LATAM and Asia I think will be very good. I would expect the Fragrance business to be positive in its growth and contribution, but not the blockbuster, exceptional strength that we are seeing in Flavors.

Then I just wanted to understand the comments on the EPS growth average that you talked about. I guess the way to think about it is that from operations you feel still sort of comfortable with a 10% plus and the ASR adds sort of 1% to 2% net earnings growth for the next two years?

Yes, it's mechanically adjusting. We stand by what we said back in October of '06 and just adjusting that for the change in the share count so we are not in anyway backing off of the strategic goal we set at that time.

I sort of had a question on the improving the operating margins to 18 plus percent goal they outlined in slide 34. It sort of had a cute little asterisk there, which wasn't in the last years slide when you gave that slide, and so I'm wondering it sounded like last year you felt you get an operating margin of 18% plus by the end of '09 and this year you sort of putting caveat exiting '09. Has something changed in terms of maybe a little bit more pressure in raw materials or the pricing issue in Functional Fragrances, has that sort of led you to put that little caveat relative to the last year?

Quite frankly it was just because people were expecting us to have a fourth quarter operating profit of 18% of sales in 2009. Quite frankly as you know, the fourth quarter is our smallest operating profit quarter and we put that in because I think people were getting a higher expectation that if we were exiting the fourth quarter with an 18% operating profit, that it should be really jumping 2010. So there's been no change to the target.

It's our plan to get to above 18.5%, we didn't make as much progress in '07 largely because the Fragrance Ingredients margin erosion. I think we are going to get that back on track this year, we have some other initiatives and I'm not backing off of that. I think that is very, very doable and the primary driver in all this is growing our share in the key segments and the key product areas.

We'll hear next from Jeff Zekauskas from JP Morgan. Jeffrey Zekauskas – JP Morgan: You were kind enough to talk about what you thought the fragrance industry growth rate was how about the flavors industry growth rate?

I could say something about the Fine Fragrance because we just got a little it of data on retail sales, we are extrapolating that. I don't have any good data for Flavors. I believe the flavors market is probably what we are using internally, growing on the order of 4% to 5% broadly on a global basis. Jeffrey Zekauskas – JP Morgan: It looks like you are picking up about five percentage points of market share or something like that? In what areas are you doing that, how are you doing that?

Well grew very substantially in beverage, which is an area we have not been particularly strong in. We continue to be strong in our traditional area of savory and the sweet. Really, the only category that didn't grow that much this year and had nothing to do with us was the dairy. As you may be aware, just because of the run up in the price of milk and dairy products, consumption of dairy overall weakened a bit this year and so demand for dairy related flavors was not quite as strong as the other areas. Jeffrey Zekauskas – JP Morgan: In beverage is this carbonated or non-carbonated where you making your gains?

It's in both. It's an example that we are getting quicker response in our Flavors business from these platforms of excellence put in place. We were able to develop some new materials and to get those materials in formulas and actually one business and shipped it this year in that category. So the approach of targeting certain categories setting up these platforms of excellence aligning our R&D is really delivering better value for our customers. Jeffrey Zekauskas – JP Morgan: Earlier in the call you were kind enough to give the growth rate of your top customers for the year, what was the growth rate for the top customers in local currency for the fourth quarter?

It was a little bit less than that, Jeff. A couple percent, I think it's reflective of really the results, because remember some of the fragrance customers are some of biggest customers and we saw that slowdown in Fine Fragrance. Jeffrey Zekauskas – JP Morgan: So it sounds like you said that you thought your volume growth next year would be around 4%. So I guess that's maybe 2% in Fragrances, 6% in Flavors. So you are expecting some kind of rebound in the Fragrance market, why is that?

I think we are not necessarily saying 2% and 4%. We said that our sales overall would be up greater than 4%. Jeffrey Zekauskas – JP Morgan: So 2% and 6% is sort of average is 4%. In order to hit that 4% you have to get some growth out of Fragrances.

We expect Fragrances to grow, we've got some new products that we are launching. We are expanding our encapsulation sales, we’ve got a series of things. I'm not going to forecast it by segment, but I believe we will have more than 4% growth in local currency and that Fine Fragrance in total will be positive for the year. Jeffrey Zekauskas – JP Morgan: Do you have a plan A and a plan B if the global economies really slow down? That is, do you have the ability to really bring your cost structure down, and if you don’t, if your volume growth doesn't measure up to your expectations?

We are being very cautious and one of the dormers we have is we start constraining our resources. We are not going to be prepared top meet the opportunity of growth. The facilities are there, we don't have excess facilities or capacity that we would want to shut down. Our primary expense is people and the people we have are some of our best assets, it takes a long time to develop and train them. I don't want to mislead you I'm not going to throttle back and cut expenses or key people because sales may go down for a quarter or two. I'm much more interested in building this company longer term and being able to capture the growth in the emerging world that we expect over the longer term.

I think in that regard too remember that the things the briefs that are being worked on right now are for commercialization to a great extent in late '08, 2009, and even 2010 for the Fine Fragrance perspective, so we have to be mindful of that growth for the future. Jeffrey Zekauskas – JP Morgan: I guess, lastly your SG&A costs were up about 10% and you were kind enough to mention that maybe five percentage points of that was currency but that also holds for your sales line, your local currency growth was only a couple of percent. Are you worried about that sort of much faster inflation of your overhead relative to your volume growth?

Remember I mentioned that we also had some additional expenses of about $2 million in the quarter for these transformation costs. I think you really have to look at the SG&A on a full year basis rather than on an individual quarter basis. Just because timing of some of the expenditures with customer testing and so forth can impact selling and admin in an individual quarter although that has a tendency to smooth out over fullness of the year.

I have to say the fourth quarter alone which I think it was up nine, we are not losing control. We've been very, very focused on maintaining our cost discipline. We are going to continue on that. For the full year, I think we are okay. The fourth quarter was a little bit higher than I would have preferred, and we'll continue to be very focused to keeping control of our overhead costs.

We'll hear next from Fabian Wenner from UBS.

Firstly on capex, you have been spending around 3% of sales in '06 and '07. Do you see that as a sustainable level or can you maybe just close as what the main capex level for you? That's the first question. Secondly, on the market share gain you've been discussing on Flavors, can you give us a bit more granularity on whether that's been with new customers primarily or were they new wins with existing customers? Thirdly, would you say it's fair to say that the environment has gotten tougher for smaller competitors to maybe regulatory standards and service requirements from large customers? Do you see any of that; do you see smaller competitors being driven out of the market? Thank you very much.

Let me try to answer those in reverse order. I think the market has become more challenging with the global nature, the global reach, regulatory settings around the world, reach, and etcetera. I think companies such as IFF have a better ability to meet those challenges. I don't know the inside of the smaller people, I know it appears that the large flavor and fragrance companies seem to be gaining share. So I think it's a fair conclusion that the smaller companies may be losing share. Your second question on where we are growing in the Flavor area, and I'm happy to say that we've grown our business with our existing clients very substantially but particularly in the beverage area but that's a new business, and I would say probably slightly more than half the growth is with our existing and something less than half the growth is with the new clients and new products.

With respect to the capital expenditures as I mentioned previously in my comments, it's been below depreciation for the last couple of years, but we expect the spend to be about $90 million this year and if you look at the cash flows which is in the press release, the depreciation and amortization, it includes about $13 million of amortization. Depreciation is about $70 million, and I expect that over any three year period the capital spending would be pretty much in line with depreciation during that period of time so roughly $70 to $75 million average per year. So over a three year period $220 to $225 million.

We'll hear next from Todd Peters with American Century. Todd Peters – American Century: Just to following up a little bit more on the capital spending incremental increase, what are you spending on is it more capacity, is it in the US, is it Europe, is it Asia? Can you give me a little more nderstanding of that?

We had announced earlier a couple of special projects, we are building a new creative center in Brazil and that really accounts for the bulk of the increase year over year, and then some selective capital capacity expansion in areas that we've grown so quickly and we are running short in the Beverage area, a couple of the other flavored products. Todd Peters – American Century: Then on the Fragrance side of the equation US, do you feel that the volume declined is an inventory and a retailer issue or is it like end consumer demand changes?

The market is growing 1 or 2% on Fine Fragrance market generally. Typically an inventory swing will be far greater than that. We don't have the data but my guesstimate is more just a backup in the channel. We know there are some customers who have slowed down their purchasing. So I think the fourth quarter change is something greater than the end product consumption change.

We'll go next to Michael Sison. Michael Sison – Key Banc : I have a follow up in Fine Fragrance, is there sort of an inventory over hang that might linger in the first quarter? The demand wasn't that good, so maybe they are not going to need some of your stuff until the second quarter?

We don't have clarity on that yet; I think there's a chance on that for sure. I think a lot of people are sorting out where they are with their inventory and their consumption. We are in discussion with all of our key customers so I'm just not able to give you a definitive answer on that. Michael Sison – Key Banc : Then in the Flavors wins in '07 just qualitatively, clearly the strength that you had in '07 was determined by good win rates in 2006. Where the win rate in '07 better, about the same, than you had in '06?

Two thousand seven benefited from good win rates in '05, '06, and in '07. The response in Flavors is oftentimes much faster than Fragrances, but I do feel, and that's why I said earlier, the momentum going into '08 is very strong for flavors, they had a very strong win rate in '07. Michael Sison – Key Banc : But you have a base of wins that sort of ensures a certain level of growth into '08 assuming you win a couple more and if the market plays positive that sort of gives you the comfort zone in strong sales growth for that segment next year.

That's correct. Michael Sison – Key Banc : In fragrances maybe the same line of questioning is there a pretty good win rate heading into '08 that gives you some comfort in maintaining some growth next year?

We've got some very, very important base business that continues to go on, we continue to win. I was just informed of the whole series of important wins somewhere in the fabric area which I'm pleased about that will be shipping in the second quarter. We stumbled a little bit in '07 in that area, we are working hard to correct it. I don't think it's going to go back to, remember the third and fourth quarter of '06 the Fragrance business was up 9%, 10%, 11% at the time we said that it was not sustainable, and so year over year comparisons are off a really tough basis. We are going to get that Fragrance business to be back on track, and I feel very strongly that we'll be able to have good growth in that business and they'll be contributing and you'll track it as we go through, and that's not a hockey stick. I think you are going to see some improvement in the first quarter. Michael Sison – Key Banc : So the first quarter improvement would be better than the year over year decline in the fourth or positive?

I'm not going to answer you there. We'll go through, you'll see an improvement sales and margins year over year. Michael Sison – Key Banc : Improving in sales and margins year over year.

Yes, I mean comparing for the first quarter to fourth quarter isn't really the representative thing it's almost a lay out. It will be improvement first quarter to first quarter. Michael Sison – Key Banc : Last question, could you just give us an update of encapsulation, how big was it in total for 2007, maybe go through what the growth potential is in '08 and maybe just an understanding of where your customers are I thought Europe and Latin America was launching and just give us a quick update on encapsulation?

It came in just about where we thought. It is just slightly less than 1% of sales, consolidated sales that is in 2007. Based on current expectations it will be somewhere between 1.5% and 2% of sales in 2008 and again that just depends on the timing of the launches, on the success of the product, but we are confident of the success of the product. New products have been introduced into the marketplace and we are interested to see how they succeed in the marketplace we firmly believe it’s a very solid product with very good performance and good consumer acceptance and success will breed success. So in 2009 the Fragrance encapsulation sales should be somewhere between 2% and 3% of our consolidated sales. So we are not backing off on the growth expectations for that technology. Michael Sison – Key Banc : In terms of the launch expectations for lay, could you just give us a feel when, is there still to be some launches in the second quarter, third quarter or it just sort of spread throughout the year?

I think the next launch of consequence will probably be in the second half of the year, but that's the commercial launch, which means that we may get some benefit of it in our second quarter. It would be a bit premature, and we don't want to preempt our customers in any way. That doesn't always have a positive effect if we preempt them. Michael Sison – Key Banc : Last question, a couple years ago you guys talked about launching some initial R&D for the for the taste stuff…

Taste receptors. Michael Sison – Key Banc Capital Markets: Taste receptors, and any update there as sort of where are you at in terms of that R&D program?

As you know, that is really very advanced high risk research, we continue to do it. We continue to progress. We have not found a confirmed win. We are going back and revalidating the actual receptors to be sure that we are working on those things, and that is really a long term project. We have a good program but we keep it modest, but nothing of substance to report to you.

We'll go next to John Roberts with Buckingham Research. [Gaji Belkanishan] - Buckingham Research: You mentioned your concerns on economic uncertainty in North America and Western Europe and I was just wondering specifically on Western Europe, what is your general outlook and maybe how that changes between continued economic strength versus recession over there?

Are you asking how I feel about the economies of Europe or our business? [Gaji Belkanishan] - Buckingham Research: Your business.

I feel that, as I indicated earlier, we'll continue to grow in Europe. The European economies are starting to feel a little bit of headwind, but Western Europe has remained pretty stable and growth in Eastern Europe has been robust especially if we include Russia in that. So, no, I think we'll continue to be able to advance consistent with our strategic goals in Europe, and most especially in the Flavors area. [Gaji Belkanishan] - Buckingham Research: In case of a recession you feel that you would be in line with all of Europe and your business in general?

We don't do cyclical forecasts. If there's a serious recession it will probably have an impact. We are not seeing that at this stage, and we are working hard to grow well beyond that.

We'll hear again from Jeff. Jeffrey Zekauskas – JP Morgan: Your amortization expense on the sequential basis went from I think about $3.6 million to $2.2 million. Why is that? And is that permanent?

That dates back to the acquisition accounting for BBA, and the identified intangibles are beginning to reach the end of their amortizable life. That’s fully disclosed on the annual report and then note on intangibles, and we'll update that this year, but yes, you begin to see a fall off in amortization, the full year effect in 2008 and then I think the next decline is in 2011 or 2012. I don't have that precisely in front of me, but you can see that in the annual report from last year. Jeffrey Zekauskas – JP Morgan: So roughly your amortization expense in '08 should be around about $8.8 million, is that right?

Yes, I think it's something like that. Jeffrey Zekauskas – JP Morgan: Secondly, what rate of interest are you play on your debt these days?

Actually the full year rate was about 4.5%. We look at debt at the balance sheet date, the rate was about 5.4% or 5.5%, and I would not expect that to fluctuate much. Jeffrey Zekauskas – JP Morgan: I guess lastly you've done obviously such a good job in Flavors versus your competition but sometimes when you look at your Swiss opponents in Fragrances, they seem to have a little bit faster growth rate than you do? So do you find that you may be losing a little bit of share in some of your Fragrance markets these days?

You break it down by segment. I don't think that's the case broadly in Fine Fragrance. I think in Fine Fragrance we've consistently grown our share. One quarter we still had a good year in Fine Fragrance in '07 and Functional, yes, I would imaginably lost some share in Functional Fragrance this year, because our growth has not met our expectation. We pretty much understand where and why that has occurred and we are working to turn around that performance. I don't think there's a structural reason. I think we didn't perform as well as we could have with a couple of key accounts, but yes in Functional Fragrance, we've probably lost a little bit of share in '07.

It appears that we have no further questions at this time.

Well, thank you all for dialing in and listening to us. We look forward to continuing the dialogue and should you have questions in the future, we are always available to you to help clarify them. Thank you very much and best wishes in the New Year.

That does conclude today's presentation. Thank you for your participation and have a great day.