Givaudan’s results disappoint

Givaudan profits disappoint Keystone

Givaudan, the world's number-two maker of flavours and fragrances, has posted weaker than expected net profits for 2001.

Net profit rose 3.4 per cent to SFr274 million ($161 million). Sales were slightly higher at SFr2.4 billion compared with SFr2.36 billion for the previous year.

Operating profit slipped to SFr396 million from SFr427 million a year earlier.

The Multex consensus of 14 analysts had expected net profit to rise by 8.6 per cent to SFr288 million on sales of SFr2.44 billion.

“Earnings were a little bit disappointing as sales were about two per cent below our expectations,” said Zurich Cantonal Bank’s chemical sector analyst, Bernd Pomrehn. “They had substantial capital expenditures… so earnings were only plus 3.4 per cent – disappointing.”

Givaudan spokesman Peter Wullschleger told swissinfo that the company’s performance had been tempered by high capital costs in 2001.

Capital costs

“We had supplementary expenses for GivaudanAccess and for several projects with key customers,” explained Wullschleger. “For example, we opened our downtown creation centres in New York and in Paris.”

GivaudanAccess is the Geneva-based company’s online portal, which allows small- and medium-sized customers to order flavours and fragrances over the Internet.

Givaudan was spun off from Roche in 2000. Since then it has been seen by analysts as a solid company whose business of providing tastes and smells to food, drink, consumer goods or perfume makers makes it largely immune to swings in the global economy.

However, even Givaudan has found itself affected by the recent downturn in the economy.

Upbeat prospects

“Because Givaudan has quite a number of potential good new products that will get into the market in 2002 they should manage to grow by more than two per cent in 2002,” explained Pomrehn. “So they will outperform the market again this year.”

An important task for Givaudan remains the integration of FIS, the flavours business of Nestlé that it acquired in January for SFr750 million.

Givaudan said the deal would make it a world leader in savoury flavours used in many soups, sauces and prepared dishes. It also helps Givaudan to close the gap on industry leader International Flavours and Fragrances of the United States.

“That was quite a good move for Givaudan as these products used in convenience foods have a higher market growth,” noted Pomrehn.

Givaudan still needs the green light from the Swiss authorities to go ahead with the agreed acquisition.

Future acquisitions

The big question on investors’ minds is whether Givaudan will buy Bayer’s Haarman and Reimer division, which the German group plans to auction.

However, Givaudan spokesman Peter Wullschleger refused to comment on the purchase.

Analysts are concerned that Givaudan might be tempted to pay over the odds for the business, tempering enthusiasm for stock in the firm, whose strong cash generation and stable margins made it the best performer in the blue-chip Swiss Market Index last year.

Pomrehn said the possible acquisition of Haarman and Reimer would lead to “quite a lot of overlap of the product portfolio and therefore a lot of restructuring. We have mixed feelings about this.”

swissinfo with agencies