Givaudan Profits Surge 79% in 2009

The Flavour Division reported sales of CHF 2,135 million, representing a growth of 1.9 % in local currencies and a decline of 2.5 % in Swiss francs, which was a solid performance despite the current global business climate.

16 Feb 2010 --- In 2009, Givaudan group sales totalled CHF 3,959 million, an increase of 1.4% in local currencies and a decrease of 3.1% in Swiss francs compared to the previous year. On a comparable basis (in local currencies and excluding the impact of divestments), sales increased by 1.6% versus 2008. Net income was up 79% to CHF 199 million
 
“Givaudan’s overall performance in 2009, against the backdrop of a difficult business environment, is a very satisfactory achievement. It is also a strong sign of our unique capability to understand and deliver innovation to support our customers, demonstrating at the same time a deep knowledge of the markets we serve. Givaudan fared better than the overall market because of the solid base we have put in place through the integration of Quest International as well as the exceptional efforts and dedication of our employees.”, said Gilles Andrier, Givaudan CEO.

Sales of the Fragrance Division were CHF 1,824 million, an increase of 0.9% in local currencies and a decrease of 3.9% in Swiss francs versus 2008.
 
Sales of the Flavour Division were CHF 2,135 million, an increase of 1.9% in local currencies and a decrease of 2.5% in Swiss francs compared to the previous year. On a comparable basis, sales increased by 2.2% versus 2008.
 
The gross profit margin declined to 45.0% from 45.6% as a result of strong increases in raw material, energy and transportation costs. Although basic commodity and energy prices have declined from the peak in the first quarter of 2009, the impact of this decline on Givaudan’s margins was not fully reflected in 2009. Production volumes were significantly lower in 2009 than in 2008, driven both by lower sales volumes, as well as a strong focus on reducing inventory levels. Production costs could not be reduced in the same proportion, as a consequence putting pressure on the Gross Margin.
 
EBITDA declined to CHF 758 million in 2009 from CHF 765 million last year. On a comparable basis EBITDA was CHF 820 million, below the CHF 842 million reported last year. The comparable EBITDA margin was 20.7% in 2009, slightly higher than the 20.6% reported in 2008. The lower gross profit was more than compensated by integration savings and cost containment measures. When measured in local currency terms, the EBITDA on a comparable basis increased by 1.7%.
 
The operating income increased to CHF 460 million from CHF 379 million last year. On a comparable basis, excluding CHF 65 million of integration costs, the operating income increased to CHF 525 million in 2009 from CHF 486 million in 2008. The operating margin on a comparable basis increased to 13.3% in 2009 from 11.9% reported last year, mainly as a result of the lower amortisation of intangible assets, as well as integration savings and other cost containment measures partially offset by continued pressure on the gross profit margin. When measured in local currency terms, the operating income on a comparable basis increased by 14.4%.
 
Financing costs were CHF 142 million in 2009, down from CHF 153 million in 2008. Other financial expense, net of income was CHF 51 million in 2009, versus CHF 71 million in 2008. In 2009 Givaudan continued to incur some exchange rates losses, but these were lower than in 2008. The Group continued to incur significant hedging costs to protect against ongoing currency volatility.
 
The Group’s income taxes as a percentage of income before taxes were 25% in 2009, versus 28% in 2008.
 
In actual terms, the net income increased by 79.3% to CHF 199 million in 2009 from CHF 111 million in 2008. This represents 5.0% of sales in 2009, versus 2.7% in 2008. Basic earnings per share increased to CHF 25.07 in 2009 from CHF 14.98 in the previous year.
 
Givaudan delivered an operating cash flow of CHF 738 million, an increase of CHF 197 million on 2008. A strong focus on working capital management delivered a reduction in inventories of CHF 126 million, down 16.7% versus 2008 levels, and accounts receivables were maintained at 2008 levels, despite a strong sales increase in the last quarter versus prior year comparatives.
 
Total net investments in property, plant and equipment were CHF 95 million, down from the CHF 194 million incurred in 2008 as the Group reprioritised investments. Intangible asset additions were CHF 64 million in 2009, a significant portion of this investment being in the company’s ERP project, based on SAP. Implementation was completed in the Netherlands and the UK and the project focus has now moved to North and South America. Operating cash flow after investments was CHF 589 million, up 113.4% versus the CHF 276 million recorded in 2008. Free cash flow, defined as operating cash flow after investments and interest paid, was CHF 459 million in 2009, a three-fold increase versus 2008.
 
 In June 2009, Givaudan successfully completed its CHF 420 million rights issue, with 99.7% of rights being exercised.
 
For the full year 2010, Givaudan is confident to further outgrow the underlying market, based on its growing pipeline of briefs and new wins.The integration achievements have reinforced Givaudan’s unique platform for accelerated growth and performance improvement. The company is confident to achieve the announced savings target of CHF 200 million by 2010 and therefore to reach its pre-acquisition EBITDA margin level of 22.7% by 2010.  In an improving environment, Givaudan continues to focus on its growth initiatives to expand in developing countries and in key segments.
 
The Flavour Division reported sales of CHF 2,135 million, representing a growth of 1.9 % in local currencies and a decline of 2.5 % in Swiss francs, which was a solid performance despite the current global business climate. Excluding the effects of the divested business, sales performance in local currencies increased 2.2%.
 
During the fourth quarter of this year, the Division achieved sales growth of 4.3% in local currencies.
 
The adverse and volatile economic environment impacted particularly the performance in North America, Central and Eastern Europe. However, the Asia Pacific and Latin America regions posted strong growth rates, with an increase in sales of 8.2% and 14.1% in local currencies respectively. Throughout all regions, our sales were impacted by the inventory reductions undertaken by our customers. However, product innovation continued to be a key business driver and as a result, an increase in new opportunities, combined with an improving ability for Givaudan to win those new projects lead to a strong inflow of new wins, particularly in the important area of Health and Wellness. When looking at the product segments, Dairy and Beverages posted solid gains, mainly led by Health & Wellness applications.
 
EBITDA increased to CHF 425 million from CHF 417 million last year. The comparable EBITDA increased to CHF 450 million from CHF 442 million reported last year. The comparable EBITDA margin increased to 21.1% in 2009 from 20.2% in 2008, driven by integration savings and tight cost containment throughout the year, both in manufacturing and commercial expenses.
 
The operating income rose to CHF 269 million from CHF 226 million last year. The operating margin on a comparable basis increased to 13.9% from 11.7% reported last year, due to the lower amortisation of intangible assets. On a comparable basis, operating income was CHF 297 million, above the CHF 256 million reported last year.
 
Givaudan’s TasteSolutions programme, focusing on salt reduction, sweetness enhancement and bitterness masking saw double-digit growth for the second year running. Included in this programme is a bitterness masking technology which enables the company to incorporate the new high-intensity natural sweetener, Stevia into our applications, particularly beverages. Over the course of the year, Givaudan continued to develop creation and application knowledge for its salt reduction and sweetness enhancement toolbox.
 
The ongoing innovation initiatives in key icon flavours, like citrus, dairy, tea, coffee, vanilla and chicken – through the development of new materials for flavourists to deliver profiles with enhanced palatability, authenticity and stability – contributed to new significant opportunities and wins.
 
Givaudan continued to build its knowledge of consumer insights through extensive investments in quantitative and qualitative market research studies. The company continued with one of the key strategic alliances with the University of California at Riverside which has one of the largest citrus collections in the world. Throughout the year, Givaudan continued to explore the Mood & Emotions area with our consumer research capability. Utilising our VAS technology we are able to capture consumer information more effectively. Our ongoing investments in consumer understanding, sensory exploration and technology have given us a clear competitive edge with our customers.