UPDATE 2-Givaudan gives upbeat 5-year targets

Tue Aug 31, 2010 7:15am EDT

* Aims to outperform the market over the next five years

* Says will cut 270 jobs in the UK and in Switzerland * Aims to return 60 pct of free cash flow to shareholders

* Confirms 2010 goals

* Shares up 1.2 pct, outperform European peers

(Adds analyst comments, shares, further details)

By Catherine Bosley and Silke Koltrowitz

ZURICH, Aug 31 (Reuters) - Swiss fragrance and flavour maker Givaudan (GIVN.VX) gave upbeat mid-term guidance on Tuesday and said growth in emerging markets should lift sales at a faster rate than competitors.

The company aims to increase organic sales by 4.5 to 5.5 percent annually over the next five years, outperforming the estimated 2 to 3 percent growth of the sector, it said, adding that half its sales should come from emerging markets by 2015.

Givaudan said it would seek to improve annual free cash flow to 14 to 16 percent of sales by 2015, continue to achieve industry-leading earnings before interest, tax, depreciation and amortisation (EBITDA) margin and would return more than 60 percent of free cash flow to shareholders once it had reached a leverage ratio of 25 percent, it said.

"These are convincing midterm targets for Givaudan," ZKB analyst Daniel Buerki said in a note. "The target for free cash flow and returns to shareholders is very attractive and shows Givaudan, on top of credible topline growth, is also a value-story."

Shares in Givaudan, which competes with Germany's Symrise (SY1G.DE) and American company International Flavors & Fragrances (IFF.N), had risen 1.2 percent by 1017 GMT, outperforming a flat Stoxx 600 European chemicals index.SX4P.

The company said it was on track to grow sales more than 5 percent in local currencies this year and to achieve its goal of returning to a 22.7 percent EBITDA margin, the level prior to its 2007 acquisition of UK-based fragrance and flavour maker Quest International.

Givaudan's flavours, made to improve the taste of foods like chicken and cheese, have held up well during the crisis and its fragrances, used in perfumes of upscale fashion houses Dior and Prada, rebounded strongly in the first half. [ID:nLDE66P0QL]

The company would invest 170 million Swiss francs in a savoury flavours factory in Hungary, it said.

Givaudan, which employs around 8,500 people, would cut 150 job in the UK and 120 in Switzerland as it moved production to Hungary, a company spokesman told Reuters.

It would spend around 75 million francs in restructuring costs, of which up to two thirds would fall in 2010 and the rest in 2011, it said.

While some employees would be offered jobs elsewhere and others would retire early, redundancies were inevitable, he said.

(Editing by Dan Lalor and David Cowell) ($1 = 1.023 Swiss francs)

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