Low market prices and restructuring hit Givaudan
a down-turn in its performance for the first six months of the year
was buouyed by a stronger showing from it international fragrance
operations.
For the first six months the company reported sales of CHF1.368 billion (€880m), which was a fall of 2.2 per cent compared to the CHF1.399 billion the company recorded for the first six months of 2004.
Givaudan said that on a local currency basis, it had maintained sales at around the same level as the previous year, indicating that the continued weakness of the Swiss currency against global currencies had impacted the bottom line.
Although gross profit increased by 1 per cent, net profit fell from CHF228 million to CHF208, a drop of almost 9 per cent on the previous year. The company said that this result was affected by higher net financial expenses.
Operating profit came in at CHF282 million, representing a fall of 1.7 per cent compared to CHF287 million the previous year.
Breaking the figures down, there was a marked difference between the performance of the company's fragrance and flavours divisions - the latter being hit by tough conditions industry-wide.
Fragrance sales, which account for approximately 40 per cent of the group's total sales, grew 2 per cent in local currencies, while sales in local currency remained at last year's levels. There was continued growth in consumer products, whereas fine fragrances was affected by tough competition.
For fragrance ingredients, specialties showed strong growth, whereas commodity sales decreased, something that the company said was in line with its strategy for future growth.
In the larger flavours division, sales declined by 3.8 per cent and 1.6 per cent in local currencies. The company said that here sales for had been affected by its strategy to rationalise low margin flavour ingredients and by the lower market prices for vanilla and citrus that have hit the industry world-wide.
The performance of the two divisions in the first half of this year is an about turn on the full year's performance in 2004, when it was the flavours division that was propping up a weaker performance in the fragrance division.
In 2004, the group reported combined sales of CHF2.68 billion (€1.74bn, represented a decline of 0.4 per cent in Swiss Francs, compared to CHF2.71 in 2003. Although the underlying trend was up, with sales from local currencies increasing 4 per cent, fragrance sales fell by 2.8 per cent on the previous year to reach CHF1.073 billion.
For the six month period the performance in both the European and North America flavour markets was down on last year, affected mainly by the tough market conditions, but the performance in the developing markets was positive.
However, the company did point out that things were looking more positive in the second quarter, when all of its regional markets recorded growth, bucking the downward trend shown in the first quarter.
Looking ahead to the full year, Givaudan said it would continue to focus on profitable organic growth and its expertise in sensory innovation, with an emphasis on balancing tight costs control measure with investments in efficiency improvements and high growth areas.
