Givaudan Reports Double-Digit Sales Growth and Strongly Improved Profitability

Group sales for the first six months of the year totalled CHF 2,199 million, an increase of 10.5% in local currencies and 10.2% in Swiss francs compared to the previous year. The strong performance from the first quarter continued into the second quarter.

Aug 5 2010 --- Givaudan has reported that group sales for the first six months of the year totalled CHF 2,199 million, an increase of 10.5% in local currencies and 10.2% in Swiss francs compared to the previous year. The strong performance from the first quarter continued into the second quarter.

Developing markets sales continued its strong 2009 growth momentum and reached 41% of group sales.

Flavour Division sales were CHF 1,182 million, an increase of 8.1% in local currencies and 7.8% in Swiss francs compared to the previous year.

Flavour Division sales increased to CHF 1,182 million, a growth of 8.1% in local currencies and 7.8% in Swiss francs. The excellent sales performance seen in the first quarter accelerated in the second quarter, which posted a growth of 8.7% in local currencies.

In an improved economic environment, the Flavour Division grew across all four regions. Strong new wins in the Sweet Goods, Beverage and Snacks segments contributed to the increase. Strong high double-digit gains were reported in all developing markets, continuing the strong growth trends from the first quarter. The mature markets delivered an accelerated growth over the first quarter, driven by volume gains and new wins particularly in North America.

EBITDA increased by 28.4% to CHF 294 million from CHF 229 million. The EBITDA on a comparable basis was CHF 303 million, above the CHF 245 million reported last year, mainly as a result of the higher sales, higher gross profit and tightly controlled expenses. When measured in local currency terms, the EBITDA on a comparable basis increased by 24.9%. The EBITDA margin on a comparable basis increased to 25.6% from 22.3% last year.
The operating income increased by 39.9% to CHF 214 million from CHF 153 million last year. The operating income on a comparable basis was CHF 224 million, above the CHF 170 million reported last year. When measured in local currency terms, the operating income on a comparable basis increased by 33.5%. The operating margin on a comparable basis increased to 19.0% from 15.5% reported last year.
The Flavour Division growth strategies continued to have a positive impact on performance as demonstrated by the double-digit growth in developing markets, Health and Wellness taste solutions and with key targeted accounts.

As a whole, Givaudan delivered an operating cash flow of CHF 229 million for the first six months of 2010, down from the CHF 422 million generated for the comparable period in 2009. The strong sales growth resulted in an increase in working capital, with both inventories and accounts receivable up. As a percentage of sales, working capital remained stable.

Total investments in property, plant and equipment were CHF 33 million, down from the CHF 43 million incurred in 2009. Intangible asset additions were CHF 34 million in 2010, a significant portion of this investment being in the company’s ERP project, based on SAP. SAP was successfully implemented in North America (Fragrances) and South America is on track to be completed by the end of 2010.

Operating cash flow after investments was CHF 163 million, down versus the CHF 344 million recorded in 2009. Free cash flow, defined as operating cash flow after investments and interest paid, was CHF 82 million in the first half of 2010, down from CHF 256 million for the comparable period in 2009.

Givaudan’s financial position remained solid at the end of June 2010. A strong operating performance was only dampened by pressure on working capital, although as a percentage of sales, working capital remained constant. Net debt at June 2010 was CHF 1,716 million, up from CHF 1,499 million (excluding the Mandatory Convertible Securities, MCS) at December 2009. The main increase in the net debt was due to the CHF 187 million payment of the dividend. In March 2010 the MCS with a value of CHF 750 million matured and the Givaudan shares were delivered to holders of theses securities. In total 736,785 new shares were delivered to holders of MCS, increasing the total number of outstanding shares to 9,233,586.

“Givaudan is capitalising on its expanded leadership position resulting from the successful integration of Quest. This translates into numerous new wins and strong sales growth across all geographies and customers, as well as into significant profitability improvements. We are on track with our targets,” said Gilles Andrier, Chief Executive Officer.

For the full year 2010, Givaudan is confident to further outgrow the underlying market, based on its growing pipeline of briefs and new wins. Despite the strong comparables of the second half year of 2009, the company expects sales to grow above 5% in local currencies for the full year. 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 the end of the year and therefore to reach its pre-acquisition EBITDA margin level of 22.7%. In an improved environment, Givaudan continues to focus on its growth initiatives to expand in developing countries and in key segments..