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Givaudan's Fine Fragrances & Fragrance Ingredients sales decline

04 Aug '09
6 min read

Sales in Latin America increased at a double-digit rate. Brazil, Argentina and Mexico continued to post strong growth.

Gross Profit
The gross profit margin declined to 44.9% from 46.5% as a result of strong increases in raw material, energy and transportation costs during the second semester of 2008. Although basic commodity and energy prices declined from the peak, the impact of this on Givaudan's input costs will only be reflected once these reductions work through the supply chain.

EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation)
EBITDA declined to CHF 388 million from CHF 444 million. On a comparable basis EBITDA was CHF 424 million, below the CHF 472 million reported last year. The lower gross profit was partially offset by integration savings and cost containment measures, limiting the decrease of the EBITDA margin on a comparable basis from 22.5% to 21.2%.

Operating Income
The operating income increased to CHF 245 million from CHF 238 million last year. The operating margin on a comparable basis increased to 14.1% from 13.0% reported last year, mainly as a result of the lower amortisation of intangible assets, as well as integration savings and other cost containment measures, partially offset by continued pressure on the gross profit margin. The operating income on a comparable basis was CHF 282 million, above the CHF 273 million reported last year.

Net Income
Net income was to CHF 95 million, resulting in a margin of 4.8%. Adjusted for the various elements of the Quest acquisition earnings per share were CHF 24.15.

Cash Flow and Financial Position
Operating cash flow amounted to CHF 422 million compared to CHF 93 million in 2008, as a result of efficient working capital management. Capital expenditure was contained at CHF 43 million, or 2.2% of sales, compared to CHF 89 million (4.3% of sales) last year. In June, Givaudan successfully completed its CHF 420 million rights issue, with 99.7% of rights being exercised.

As a result of a strong focus on cash generation, lower capital expenditures and the proceeds of the rights issue, net debt at the end of June 2009 was CHF 2,450 million, down from CHF 3,182 million at December 2008. Excluding the Mandatory Convertible Securities, net debt at the end of June 2009 was CHF 1,703 million, down from CHF 2,438 million at December 2008. In July 2009, Givaudan has used the full proceeds of the rights issue to reduce the syndicated loan facility arranged as part of the Quest acquisition. At 30 June 2009, the leverage ratio was 33%, compared to 46% at the end of 2008.

Integration of Quest International
Integration activities continued to be on track, with further progress to align the combined supply chain. Integration activities continued to be on track, with further progress to align the combined supply chain. Overall, Givaudan is well on track toachieve CHF 170 million and CHF 200 million of sustainable synergies at the end of 2009 and 2010 respectively. In the first half of 2009, the company incurred CHF 37 million of integration costs.

The global business transformation project Outlook (SAP-based ERP system) addressing the supply chain, regulatory and finance is progressing well on time and budget.

Outlook
For the full year 2009, Givaudan is confident to outgrow the underlying market, based on a solid briefs pipeline and new wins.

The integration achievements have reinforced Givaudan's unique platform for accelerated growth and performance improvement. The company is confident to achieve the announced savings target of CHF 200 million by 2010 and therefore to reach its pre-acquisition EBITDA margin level of 22.7% by 2010.

In a challenging environment, Givaudan continues to focus on its growth initiatives to increase its share in developing countries and in key market segments over the coming five years.

Givaudan

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