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UPDATE 2-Givaudan sales growth falls short as perfume demand drops

Tue Apr 16, 2013 4:23am EDT

* Q1 sales up 3.9 pct to 1.09 bln Sfr vs f'cast 1.11 bln

* Sales in fine fragrances unit down 5.5 percent

* Mid-term guidance of 4.5-5.5 pct growth confirmed

* Shares fall 2.5 percent, underperform sector (Adds analyst comment, further detail, share price)

By Silke Koltrowitz

ZURICH, April 16 (Reuters) - Sales at fragrances and flavours maker Givaudan SA rose less than expected in the first quarter, as demand fell in Europe and North America for its fine fragrances used in perfumes.

Givaudan shares were down 2.5 percent at 1,114 francs by 0732 GMT, underperforming a 0.3 percent weaker Swiss market . The stock had risen almost 19 percent so far this year and hit a record 1,232 francs last month.

Sales increased 3.9 percent on a like-for-like basis to 1.09 billion Swiss francs ($1.2 billion), the company said in a statement on Tuesday, missing an average forecast for 1.11 billion in a Reuters poll.

Sales in its fine fragrances unit declined 5.5 percent as new business in Latin America was not enough to offset a decline in Europe and North America, the Geneva-based group said.

Givaudan, which competes with Germany's Symrise AG and American International Flavors & Fragrances Inc, said demand remained strong for its fragrances used in consumer goods such as washing powders, toothpaste and soap, as well as for its snack, beverage and dairy flavours.

Givaudan will soon generate half of its sales in emerging markets, where fast-growing middle classes are driving demand for its products. It confirmed its mid-term guidance of between 4.5 and 5.5 percent underlying annual sales growth, against average growth of about 2 to 3 percent for the market as a whole.

"Growth slowed in the first quarter, partly because the impact of price increases is fading out, but the slowdown was more marked than we expected," ZKB analyst Daniel Buerki said.

Analysts at brokerage Notenstein said the fact that sales growth missed the company's own guidance could put off investors in the short term, but added that long-term growth prospects were intact, thanks to the group's geographical diversification and the increasing appetite for ready-to-eat meals and perfumes in emerging markets.

Givaudan shares trade at about 19.9 times estimated earnings for the next 12 months, a premium to Symrise at 18.4 times and IFF at 16.6 times.

Symrise had said in March it wanted to outperform estimated market growth of 2 to 3 percent this year and grow sales by between 5 and 7 percent a year through 2020. It expects raw material prices to remain at a high level in 2013.

($1 = 0.9298 Swiss francs) (Editing by Matt Driskill and David Holmes)

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