Profit boosts but margin slips for Givaudan

Despite boosting 2001 net profit, Swiss flavour and fragrance company Givaudan saw its operating profit and margin slip, the group said on Wednesday.

Net profit rose to SFr274 million (E185.5m) from SFr265 million on sales of SFr2.40 billion, up from SFr2.36 billion. Earnings per share rose to SFr32.92 from SFr30.95.

It forecast good overall results in 2002 "barring unforeseen events", and proposed raising its dividend to SFr7.0 per share from SFr6.50.

But operating profit fell to SFr396 million from SFr427 million and its operating margin slipped to 16.5 per cent of sales from 18.1 per cent in 2000.The company had warned in October that it did not expect great strides in profitability given the expense of building up its GivaudanAccess online sales platform and the opening of fine fragrance laboratories in Paris and New York.

"Marketing, development and distribution expenses were increased at a higher rate than sales growth, leading to a lower operating margin,"​ Givaudan said.

The Multex consensus of 14 analysts was for 2001 net profit to rise 8.6 per cent to SFr288 million francs on sales of SFr2.44 billion. Its operating profit and dividend had also been expected to advance.

According to a Reuters report, looking beyond 2001 results, the big question on investors' minds is whether Givaudan will buy Bayer's Haarmann & Reimer division, which the German group will auction for at least E1.5 billion.

Concern that Givaudan may be tempted to overpay for the business has tempered analysts' enthusiasm for stock in the firm, whose strong cash generation and stable margins made it the best performer in the blue-chip Swiss Market Index last year.

Givaudan, spun off from Roche Holding in 2000, has been a solid company whose business of providing tastes and smells to food, drinks, consumer goods or perfume makers makes it largely immune to swings in the global economy.

Givaudan has said in the past it will not pay top dollar for acquisitions, especially after it agreed in January to buy Nestle's FIS flavours unit for SFr750 million in cash, stock and assumed debt.

Buying FIS expanded Givaudan's savoury flavours business where it was not strong, the price was right, and its ability to pay partly in stock kept its balance sheet strong so that it could finance other transactions that emerge, analysts noted.

Givaudan said the deal would make it world leader in savoury flavours used in many soups, sauces and prepared dishes. It also helps Givaudan close the gap on industry leader International Flavors and Fragrances of the United States.