* H1 net profit up 36 pct to 271 mln Sfr
* H1 sales rise 5.7 pct to 2.225 bln Sfr
* Lowers raw material price outlook
* Shares rise more than 4 pct, outperform index
By Silke Koltrowitz
ZURICH, July 25 Strong demand in Europe, North
America and emerging market countries pushed fragrance and
flavour maker Givaudan's first-half sales up 5.7
percent, sending its shares up more than 4 percent on Thursday.
Givaudan and its peers have benefited from the growing
prosperity of emerging markets consumers, including in Africa
and Latin America, who are able to afford ready-to-eat meals,
cosmetics and detergents that use their scents and flavours.
"There was a big rebound in fine fragrances in the second
quarter but we also saw very good momentum in flavours in the
mature markets of western Europe and the U.S.," Chief Executive
Gilles Andrier told Reuters in a telephone interview.
Its fine fragrances, found in perfumes by Dior and Prada,
were also boosted by new business in Latin America, notably
BRICS nation Brazil, he said.
In the first half of the year, the unit, which accounts for
about 10 percent of group sales, returned to sales growth of 2.5
percent, after a decline of 5.5 percent in the first quarter.
Group sales reached 2.225 billion Swiss francs ($2.38
billion), just ahead of forecasts in a Reuters poll. Net profit
jumped a better-than-expected 36 percent to 271 million francs,
helped by lower financing costs and a lower tax
Givaudan shares, which have gained more than 31 percent so
far this year, rose 4.2 percent to 1,318 francs at 1154 GMT,
outperforming a 1.4 percent weaker chemicals index.
"We are a very defensive business because we supply
fragrances and flavours for things that consumers buy and
consume every day...you don't stop brushing your teeth or
drinking," Andrier said.
Developing markets accounted for 45 percent of sales and
grew 9.4 percent in the first half. Sales grew 5.2 percent in
Europe, Africa and the Middle East in the first half, with
strong demand in Russia among other places.
In western Europe, Britain and Ireland lead the way.
"We have seen that in 2009 and see that again today that
even in a very difficult environment like in Europe we still
manage to grow, modestly, but we grow."
"We've seen good growth in Italy and Spain, surprisingly, in
countries which are encountering huge economic issues.
Latin America had very good growth in fine fragrances but
the second quarter rebound stemmed from North America and
western Europe, he said.
"Fine fragrances is obviously the most discretionary part of
our business but it accounts for only 10 percent of our sales,"
The group was now expecting flat raw material prices in
2013, instead of its earlier guidance for a 1-3 percent rise,
meaning there was no need for a new round of price hikes.
The Geneva-based group confirmed it wanted to grow sales by
4.5-5.5 percent each year over the mid-term, assuming underlying
market growth of 2-3 percent, and continue to gain market share.
Small to mid-sized acquisitions are also possible if they
give the group access to specific knowhow in a developing
market, new clients or natural ingredients, Andrier said.
Vontobel analyst Jean-Philippe Bertschy said results were
excellent, noting double-digit growth in fine fragrances in the
second quarter, the improvement in profitability and the "very
healthy" free cash flow.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) margin improved to 22.9 percent from 20.6 percent a
year ago, helped by earlier price increases and cost-saving
measures, Givaudan said.
Notenstein analysts said the high free cash would help the
group stick to its investor-friendly policy on cash returns.
"Many think the defensive stock is already expensive, but
after these convincing figures, it should continue to be
Givaudan shares trade at 21.4 times forward earnings, at a
premium to Germany's Symrise at 19.1 times and
U.S.-based International Flavors & Fragrances at 16.8.
IFF will publish its second-quarter results on August 6 and
Symrise will follow suit on August 7.