Givaudan Chief Budgets for Stable Growth in 2015 After Slowdown
(Bloomberg) — Givaudan SA, the supplier of fragrances for Tom Ford’s Plum Japonais and Ralph Lauren Polo Red, is budgeting for stable sales growth this year after last year’s deceleration caused by weaker U.S. and European markets.
The pace should match the 3.7 percent like-for-like rate reported in 2014, Chief Executive Officer Gilles Andrier said in an interview today. A slowdown in Asia, particularly China, and lower demand for some consumer products in the U.S. ate away at growth rates over the course of last year.
“We see the same sort of market conditions for 2015 as for 2014,” Andrier said. “We don’t see any sort of acceleration in our business.”
Givaudan is experiencing weaker growth than its medium-term target of 4.5 percent to 5.5 percent, excluding acquisitions and currency shifts. The Geneva-based maker of flavors and scents will stick to its expansion plan that’s adding plants in faster- growing emerging markets such as India. Africa and Latin America will help counter the U.S., western Europe and Asia, markets that Andrier says he’s more cautious about.
Despite the slowdown that began last year, the average growth over the past five years is 5.2 percent.
In the U.S., where Givaudan competes with New York-based International Flavors & Fragrances Inc., demand for consumer products laced with fragrances has yet to pick up. Trends in real estate, financial markets could point to a “positive effect” later this year, according to the CEO.
Buzzing Noise
“There’s a lot of noise and buzz about the U.S. economy picking up, but essentially it doesn’t yet affect consumer goods,” the CEO said. “Maybe there’s a question there of time lag. Maybe we’ll see a positive effect on consumer goods later this year, but I remain cautious about the U.S.”
Two of Givaudan’s main competitors have changed management in the past year. IFF has appointed former Pfizer Inc. executive Andreas Fibig as its CEO, and Swiss rival Firmenich hired Diageo Plc’s Gilbert Ghostine to head the company. Within the flavors and fragrance industry, it typically takes a couple of years to make a significant impact on the sales of a company, Andrier said.
Givaudan, which also competes with Symrise AG, rose 0.3 percent to 1,656 francs as of 10:35 a.m. in Zurich.
Makers of deodorants and other clients of Givaudan remain as innovative as ever, yet consumers aren’t spending at the same rate, Andrier said. That’s putting more emphasis on emerging markets, and Givaudan plans to begin construction of a flavors plant in India.
Investment will be maintained as projects are “normally very easy business cases,” he said.
Givaudan’s 2014 sales of 4.4 billion francs ($4.8 billion) met analyst estimates. Net income was 563 million francs, compared with an estimated 567.2 million francs.
“This is a good set of numbers, reflecting healthy growth in emerging markets,” Marcus Diebel and Andrew Benson, analysts at Citigroup Inc., said in a note. “We would expect the market to be reassured by this performance but see limited potential for outperformance given expectations were already high into numbers.”
To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Thomas Mulier, Tom Lavell
