Aug 5, 2010
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Givaudan upbeat as consumers buy more perfumes

Aug 5, 2010

ZURICH, Aug 5 (Reuters) - Fragrance and flavour maker Givaudan (GIVN.VX) struck an upbeat note for 2010 as retailers restocked perfumes and strong demand in emerging markets helped its first-half sales and net profit beat expectations.


The industry leader for flavours to improve the taste of food and fragrances for designer perfumes said on Thursday it expected sales to rise more than 5 percent in local currencies in 2010, thus outgrowing the underlying market.

The group also repeated that its earnings before interest, tax, depreciation and amortisation (EBITDA) margin should improve to 22.7 percent by the end of 2010, reaching the level prior to the 2007 acquisition of UK-based fragrance and flavour maker Quest International, whose integration is almost finished.

Profitability stood at 24.1 percent during the first six months.

The company coped well with the economic downturn as demand for its flavours and commercial scents, especially in emerging markets, offset a decline in more cyclical fine perfumes.

French luxury goods group LVMH (LVMH.PA) said last week sales in its perfumes and cosmetics unit had risen 12 percent in the first half while Hermes (HRMS.PA) reported a 25 percent rise in perfumes sales two weeks ago.

Net profit at Givaudan more than doubled to 200 million Swiss francs, helped by lower integration costs for Quest and an improved financial result, ahead of a forecast of 191 million francs in a Reuters poll.


Sales rose 10.5 percent in local currencies to 2.199 billion francs. Analysts in the poll had expected 2.14 billion francs.

"Developing markets sales continued its strong 2009 growth momentum and reached 41 percent of group sales," Givaudan said in a statement.

"The figures are very good," said Vontobel analyst Claudia Lenz. "Fragrances performed well with 12.4 percent growth in local currencies in the second quarter."

The real surprise was the flavours division, which was facing tougher comparisons after faring better during the economic downturn. "There was no slowdown in flavours in the second quarter but a rise with organic growth of 8.7 percent and a better-than-expected margin," Lenz said.

Givaudan competes with U.S.-based International Flavors & Fragrances (IFF.N), which publishes second-quarter results later on Thursday, and Germany's Symrise (SY1G.DE), due to post results on Aug. 10.

Givaudan shares trade at around 15 times estimated 2011 earnings, at a discount to Symrise at 15.8 but at a premium to IFF at 13.2.

(Editing by Michael Shields)

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