Nutrition and flavors boost growth: Symrise overcomes raw material inflation to report strong annual sales
13 Mar 2019 --- Major producer of flavors and fragrances, Symrise AG, says it has overcome most headwinds such as increasing raw material costs, to retain its earning power and take “full opportunity” of growth opportunities in 2018. Taking into account portfolio and exchange rate effects including the acquisitions of Cobell and Citratus, sales increased by 5.3 percent to €3.1 billion (US$3.5 billion).
On organic basis, sales growth amounted to 8.8 percent, exceeding the increased guidance issued in late autumn, notes the German-headquartered company who also says there was a solid performance across all segments and regions.
Despite targeted investments in increased capacity – including new nutrition site in Georgia, US, and a new production facility for fragrances and flavors in Nantong, China (which is currently being built), and negative effects from exchange rates and raw material costs, the Group achieved earnings before interest, taxes, depreciation and amortization (EBITDA) of €631 million (2017: €630 million).
The industry-wide shortage of raw materials, including the key raw material Citral, which already prevailed in 2017, intensified in the past fiscal year, notes the company.
However, Symrise was able to meet supplier obligations at all times and in full throughout the year. In addition, the Group actively implemented price increases to compensate for higher raw material costs.
With an EBITDA margin of 20 percent, profitability remained healthy and within the target corridor of 19 to 22 percent.
"Symrise again grew profitably and outperformed the market. We identified and successfully capitalized on growth opportunities in every business segment. We also invested in future growth and added to our capacity,” says Dr. Heinz-Jürgen Bertram, CEO of Symrise AG.
“Although we were not able to counteract all of the headwinds caused by high raw material prices and negative currency effects, we still operated with a healthy profitability.”
Bertram notes that at the forthcoming Annual General Meeting, the Executive Board and Supervisory Board will propose a dividend increase to €0.90 (US$1.02) per share for the fiscal year 2018.
"Despite the anticipated economic slowdown, we have made a confident start to the new fiscal year. We have substantiated our long-term ambition with the updated forecast. It extends into the year 2025 and provides for a strong increase in sales with further improved profitability,” he adds.
Symrise experienced unfavorable exchange rate effects especially through the strong Euro in relation to the US-Dollar. Symrise again grew significantly faster than the relevant market for fragrances and flavors, where growth in 2018 was in the 3 to 4 percent range, according to the company.
The Flavor segment experienced strong organic growth of 9.5 percent, with sales increasing to €1,191 million. Flavor benefited in particular from strong demand in the EAME region, which achieved impressive double-digit growth. Growth was also driven by applications for sweets and beverage products.
EBITDA in the Flavor segment, at €244 million, was slightly higher than the prior-year figure of € 243 million.
Nutrition increased organic sales in the past fiscal year by 7.4 percent to €639 million.
The segment grew by 1.2 percent. The strongest impetus came from the Pet Food application area, while the Food application area also performed well with double-digit growth.
Nutrition achieved an EBITDA of €132 million (2017: € 139 million). The decline in earnings compared with the previous year is attributable to two factors: Investments in the new Diana Food location in the US and a lower contribution to earnings from Probi due to a temporary inventory decrease by a major customer in the first half of the year, says Symrise.
Symrise has a confident outlook for 2019 and ambitious long-term targets until the end of 2025. The Group again aims to exceed the overall growth rates in the relevant market. The market is projected to grow at a rate of 3 to 4 percent worldwide. In addition, Symrise is targeting an EBITDA margin of around 20 percent despite the anticipated economic slowdown, ongoing volatility in exchange rates and a tight market for raw materials.
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