Flavours and fragrance market to shrink, says

Symrise CEO By Guy Montague-Jones, 06-Aug-2009

Symrise CEO predicts continued shrinkage in the fragrance and flavour market as
acquisitions prop up first half sales and weigh down profits.
In what the company called “a persistently difficult market”, both the flavour and fragrance arms of the
business struggled to grow. Reported first half sales edged up 1.4 per cent to €685.1m and sales in
local currency terms fell 0.8 per cent.
CEO Heinz-Jurgen Bertram does not expect any imminent reversal of the downward trend. He said:
“The flavour and fragrance market will presumably shrink slightly this year. Customers continue to
destock and the costs of important raw materials remains at a high level.”
Acquisitions
Returning to the first half of the year, the flavour and nutrition division reported better sales figures
than the scent and care unit but both had their sales performance boosted by acquisitions made in
2008.
Reported sales from the flavour and nutrition business were up 2.5 per cent on last year to €341.5m,
driven by particularly healthy growth from the Americas. But much of this growth was attributable to
last year’s Chr. Hansen Flavours acquisition, without which sales in the division would have dropped
2 per cent.
Meanwhile, scent and care sales were more or less flat creeping up 0.3 per cent to €343.6m in
reported terms. Symrise said strong numbers from North America and the Asia-Pacific largely
compensated for declining sales in Europe and the Middle East.
But the stable sales figures do not compare like with like. Taking into account acquisitions made in
2008 sales in the division fell 3 per cent.
The acquisitions on both sides of the business may have benefited the reported sales figures but put
a drag on profits.
Net income for the period fell 33 per cent to €41m and the cost of integrating Chr. Hansen Flavours
and other recently acquired businesses contributed to the decline.
High raw material prices and restructuring expenses were also blamed for the sharp decline in profits.
Restructuring
Symrise has taken a number of cost-cutting steps in recent quarters including the closure of
fragrance plants in Spain and Switzerland in order to bundle its entire scent and care production for
Europe and the Middle East in Holzminden, Germany.
The full effect of this and other restructuring measures is expected to be felt at the beginning of next
year.
Symrise did not publish the restructuring expenses in its results but the firm said its EBITDA margin
for the period was 17.3 per cent and adjusting for restructuring it was 18.9 per cent. In the same
period last year the EBITDA margin was 21.1 per cent.
Forecast
Looking forward, Symrise reiterated its forecast that it would be able to outperform the overall flavour
and fragrance market this year. Its financial results for the first half come only a day after Swiss rival
Givaudan published its figures for the period.
Sales were up 4.7 per cent in reported terms to 1.996bn Swiss Francs (CHF) (€1.30bn), but in local
currencies they were down 0.9 per cent. The company said it saw “encouraging recovery signs” in its
most recent sales performance.