Givaudan profits slump despite flavours growth

03-Aug-2011 - Last updated on 04-Aug-2011 at 11:24 GMT

Mixed fortunes for Givaudan as high costs and currency rates counter growth in snacks, dairy and beverages

Flavour and fragrance firm Givaudan’s first half net profits crashed by 40 per cent as raw material costs and record currency rates take their toll on the Swiss company, despite good local growth in its flavours businesses.

The food flavour giant, that also produces fragrances for perfumes, reported that first-half net profit fell by 40 percent to 120 million CHF (108m euro), after a record-high Swiss franc and rising raw material prices meant that even a 4.3 per growth in group sales could not prevent the company missing many analysts’ expectations.

Flavours

The company’s flavours division saw sales hit 1.08 billion CHF, an increase of 4.7 per cent in local currencies, but a decline of 8.8 per cent in Swiss francs compared to the previous year.

Givaudan said that continued cost increases for key natural ingredients, including citrus and oil derivatives, reduced the profitability its flavour business, however growth in emerging markets and strong performance in beverages, dairy, sweet goods, and snacks, provided a basis for global growth.

Sales growth was driven both by growth of the existing business and new business in Asia Pacific, combined with good growth in North America and developing markets in Eastern Europe, the Middle East and Latin America.

Sales in Asia Pacific rose 9.6 per cent in local currencies, whilst Europe, Africa and Middle East provided a growth of 4.2 per cent, driven by strong growth in Eastern Europe and central Asia.

Group performance

Group sales for the first six months of the year totalled just over CHF 2 billion, an increase of 4.3 per cent in local currencies, but an 8.8 per cent decline in Swiss francs compared to the previous year

“In the first half year 2011, we achieved a local currency growth of 4.3%, in line with our mid-term guidance. Raw material cost increases have affected our profitability,” said Chief Executive Officer, Gilles Andrier.

The news has seen the Swiss company’s share price plummet by 8.38 per cent. According to Reuters today’s share drop is the latest in a series as Givaudan shares underperform against those of rivals Symrise and American International Flavors & Fragrances this year, as investors worried about currency pressure caused by the appreciation of the Swiss franc.

“Givaudan has successfully implemented price increases in collaboration with its customers. These price increases started to become effective in the course of the second quarter. Givaudan's business momentum continues to be strong with a full project pipeline and a further increased win rate. We therefore are confident to achieve our ambitious mid-term targets,” added Andrier.