Symrise reports accelerated organic growth, expands business in all segments
14 Aug 2018 --- Symrise AG (Symrise) has accelerated its organic growth course in the second quarter. All segments and regions contributed to this positive development, according to the company. Group sales rose significantly by 9.0 percent in the first half of 2018 and earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to €317.1 million (H1 2017: €322.9 million). Against the background of this positive business performance, Symrise is refining its outlook for 2018. The group now expects an increase in annual sales above the medium-term target corridor of 5 to 7 percent, therefore growing significantly faster than the market.
“Symrise took advantage of the momentum in the second quarter and significantly expanded business in all segments. Our comprehensive backward integration is proving to be a great asset. Also with a shortage of certain key raw materials for fragrance compositions, we were able to supply our customers reliably,” notes Dr. Heinz-Jürgen Bertram, CEO of Symrise AG.
“We are moving into the second half of the year from a strong position. Targeted investments in research and development, sales strength and capacity expansions are driving our growth. Therefore, we are raising our sales forecast for the current fiscal year. We expect organic growth above our medium-term target corridor of 5-7 percent and will therefore significantly exceed market growth.”
High demand
In the first six months, Symrise increased its organic sales by a healthy 9.0 percent. The second quarter was particularly dynamic with double-digit sales of 10.6 percent. Symrise is therefore once again one of the fastest-growing companies in the industry. All segments and regions contributed to this positive business performance. Considering portfolio effects, such as the contribution from the recently acquired companies Cobell and Citratus, and exchange rate effects, sales grew by 4.0 percent to €1,575.5 million (H1 2017: €1,515.3 million).
Latin America was the key growth driver at the regional level. During the reporting period, the region recorded organic sales growth of 16.1 percent. In the second quarter, growth reached even 20.2 percent. The Asia/Pacific region sales grew by 12.3 percent in the first half of the year, followed by EAME and North America with growth rates of 7.4 percent and 5.2 percent, respectively. In Emerging Markets, Symrise increased sales by 12.8 percent. These markets, which are characterized by dynamic growth, contributed 43 percent to total sales.
Flavors
Flavors achieved strong organic sales growth of 10.9 percent in the reporting period. All regions and application areas significantly expanded their sales. The segment also benefited from new business with vanilla and the high price level of vanilla applications. Considering exchange rate effects and the Cobell acquisition, the segment’s sales grew by 9.0 percent to €604.7 million (H1 2017: €554.8 million).
In the EAME region, the Flavor segment achieved double-digit organic growth rates. Significant growth impetus came mainly from applications for Sweets and for Savory in Western Europe and Russia.
The Asia/Pacific region recorded high single-digit and for some areas even double-digit, growth rates across all application areas. The markets of China, India, South Korea and Singapore developed particularly well.
Latin America also showed an excellent development with organic growth rates in the upper single-digit range. Sweets and Savory performed exceptionally well, achieving double-digit growth in Argentina, Brazil and Mexico.
The North America region achieved double-digit organic sales growth rates as well and therefore also showed a very positive development. The first half of the year was particularly dynamic in the Beverages application area.
Nutrition
Nutrition generated organic growth of 3.6 percent in the first six months. This figure reflects the temporarily destocking of one major customer of Probi. Adjusted for this effect, growth in the segment amounted to 7.6 percent. Sales amounted to €310.6 million (H1 2017: €322.2 million). Order intake at Probi is expected to normalize in the second half of the year, according to Symrise.
The Food and Pet Food application areas each recorded fixed single-digit organic growth rates, with particularly high growth rates in EAME, North and Latin America.
Nutrition generated an EBITDA of €62.2 million in the first half of 2018 (H1 2017: €71.6 million). The temporary decline mainly reflects the lower sales contribution from Probi and ramp-up costs for the new Diana site in the US. With all these effects, the EBITDA margin was at stable 20.0 percent (H1 2017: 22.2 percent).
Symrise raises outlook
Based on the strong growth momentum of the first six months, Symrise is refining its sales guidance for the current fiscal year: For 2018, the group expects to significantly exceed market growth, which is expected to range between 3-4 percent. Symrise now expects sales growth of more than 7 percent, and thus above the medium-term target corridor of 5-7 percent.
Symrise also expects for the second half of the year that the continuing shortage of key raw materials for perfume compositions will not lead to any shortfalls in its supply. Nevertheless, as in the first half-year, higher purchase costs for raw materials are likely. Overall, the company considers itself well positioned to compensate for market shortages by its backward integration.
The medium-term targets through to the end of the fiscal year 2020 remain in effect, including a compound annual growth rate (CAGR) in the 5-7 percent range and an EBITDA margin between 19-22 percent.
