Profit at Givaudan takes a tumble

First-half net profit at fragrance and flavour maker Givaudan of Geneva dropped 40 per cent to SFr120 million ($155 million), missing analysts’ expectations.

The problems have been the record-high Swiss franc and rising raw material prices.

Givaudan, which makes food flavours as well as fragrances for Dior and Prada perfumes, is grappling with slowing consumer demand that may make it more difficult to push through the price rises necessary to offset higher costs for raw materials.

“Givaudan expects that input costs will increase by an average of 15 per cent in 2011 compared with 2010,” the company said in a statement on Thursday, adding it expected price increases to mitigate half of the impact of higher raw materials this year.

Givaudan shares have underperformed those of rivals Symrise and American International Flavors & Fragrances this year, as investors are worried about currency pressure caused by the appreciation of the Swiss franc.

The group reiterated it wanted to grow organic sales between 4.5-5.5 per cent per year over the midterm.

Group sales rose 4.3 per cent in local currencies to SFr2 billion in the first half, but fell 8.8 per cent in francs due to the strong appreciation of the Swiss currency.

Sales of the group’s fine fragrances fell slightly in local currencies after rising strongly during the same period last year when retailers restocked perfumes after the financial crisis.