Firmenich reveals annual growth despite COVID-19 headwinds

11 Aug 2020 --- Technology continues to be a major priority for Firmenich International SA, which has announced plans to continue investing for the long-term, notwithstanding any near-term challenges. In the release of its Full Year Results ended June 30, 2020, the flavor powerhouse acknowledges that it is operating in a context of “unparalleled uncertainty.” Despite facing significant global challenges as a result of COVID-19, Firmenich has seen growth of 2.8 percent on a local currency basis, bringing group revenue up to CHF 3,878 million (US$4,241 million).

“Within our Flavors business, the Savory and Sweet Goods segments performed well. Savory categories, like soups, prepared foods, sauces and snacks benefited from higher customer demand across the world, as people began cooking and eating more at home, while our strong sugar reduction portfolio helped support growth momentum within Sweet Goods,” a Firmenich spokesperson tells FoodIngredientsFirst.

“Firmenich proved its resilience and leadership during the past year, creating value for its stakeholders while navigating the unprecedented challenges of COVID-19. We supported our clients across the food, personal, body and home care supply chains to continue to deliver essential products to consumers around the world. We also accessed the public financial markets for the first time in our history, successfully raising the equivalent of CHF 2.9 billion (US$3.2 billion) in corporate bonds,” says Gilbert Ghostine, CEO of Firmenich.

The spokesperson further details that the company was able to keep its factories and labs operational throughout the pandemic. “Firmenich’s performance and its ongoing success reflect the inherent resilience of the business. We are present in a variety of end markets that are supported by strong macro trends.”

They continue that the company is also diversified across geographies and across types of customers. While some segments of the business experienced declines linked to travel restrictions and lockdowns, other segments such as Flavors and Consumer Fragrance, drove growth. “The pandemic has demonstrated more clearly than ever before the mission-critical role that the company plays in food and personal hygiene value chains worldwide,” says the spokesperson.

Flavors revenue grows nearly 4 percent
The company has reported an adjusted EBITDA of CHF 859 million (US$940 million), representing a margin of 22.1 percent. The company says that this margin is due to continued productivity gains and cost discipline. Meanwhile, Free Cash Flow reached CHF 454 million (US$497 million), marking a nearly 8 percent increase from FY 2019. This mainly stems from Firmenich’s focus on cost reduction and cash preservation measures in response to the COVID-19 crisis.

Notably, the Flavors arm of the company saw 3.8 percent revenue growth, in comparison to 2.2 percent growth in Perfumery & Ingredients. Worldwide lockdowns and travel bans affected some of the business segments, in particular Foodservice and Fine Fragrance, with a knock-on effect on perfumery ingredients. This impact was offset by a strong performance in Savory, Sugar Reduction, Plant-Based Proteins, Personal Care, Body Care and Home Care.

Reflecting on a year of action
Firmenich has had a year filled with major moves, including acquiring a 65 percent equity stake in VKL, a specialist in spices and seasonings in India. This broadened Firmenich’s raw material palette for clean label ingredients and customer reach in this critical strategic market.

Last November, it acquired the CO2 extraction facility from Evonik, significantly expanding its capabilities in supercritical fluid extraction (SFE). The following month, FoodIngredientsFirst reported how the company is experimenting with using water in place of carbon dioxide as part of SFE.

In light of this, Firmenich notes that it has been strengthening its science capabilities, investing 9.5 percent of revenue in R&D, including in the plant-based arena. “We are actively involved in shaping Smart Protein solutions, supporting the rise of vegan and vegetarian diets. Our unique integrated solutions improve everything from taste to texture and match the succulence of meat proteins in vegetarian and seafood alternatives,” details the company. Digitalization is also top of mind, with e-commerce sales doubling compared to FY2019.

Embracing technology and sustainability
Firmenich has also continued to leverage the proprietary natural sweeteners and salt reduction technologies discovered in its laboratories to combat excess sugar and salt consumption. The company says that this is while preserving taste and contributing to consumers’ well-being.

Digitalization is also top of mind, with e-commerce sales doubling compared to FY2019, reaching CHF 111 million (US$121 million) in sales. Firmenich also enhanced its ingredient discovery and creation capabilities using artificial intelligence (AI) research developments from its Digital Lab partnership with the Swiss Federal Institute of Technology Lausanne (EPFL) in Switzerland.

Amid all of this, the company is focalizing environmental sustainability. It states it is the first in the industry to complete the UN Sustainable Development Goals Action Manager assessment, a key milestone toward B Corp Certification. Additionally, entirely renewable electricity now powers all operations. Firmenich’s commitment to the most ethical, traceable and sustainable supply chain was further recognized by the highest Platinum rating of 83/100 from EcoVadis for environmental and social performance, placing Firmenich in the top 1 percent of the 65,000 suppliers assessed.

“This year was marked by many strategic breakthroughs, from acquisitions to key innovation launches and a wealth of global recognition for our leadership in responsible business. I extend my deepest appreciation to [Ghostine], the management team and our 10,000 colleagues for setting new standards for Firmenich and our industry,” concludes Patrick Firmenich, Chairman of the Board, Firmenich.

By Katherine Durrell