Givaudan Group has reported a solid first six months of the year results with growth across both flavor and fragrance platforms.

Sales for the first six months of the year were CHF 2,483 million, an increase of 2.3 percent on a like-for-like basis and 6.4 percent in Swiss francs.

The Flavor Division sales were CHF 1,346 million, an increase of 4.4 percent on a like-for-like basis and 12.0 percent in Swiss francs, while Fragrance Division sales were CHF 1,137 million, an increase of 0.1 percent on a like-for-like basis and 0.4 percent in Swiss francs.

According to the Swiss-based company, it continued the year with good business momentum and with the project pipeline and win rates being sustained at a high level. This good growth was achieved against strong prior year comparable for the same period in 2016, particularly in the Fragrance Division. 

Gross profit
The gross profit increased by 3.6 percent from CHF 1,093 million in 2016 to CHF 1,132 million in 2017. Continued productivity gains partially offset the impact of the Spicetec business, acquired in July 2016. The gross margin decreased to 45.6 percent in 2017 from 46.8 percent in 2016.

The EBITDA decreased by 6.5 percent to CHF 597 million from CHF 638 million for the same period in 2016. The Group continued to exercise strong discipline over operating expenses. In 2017, the Group incurred costs of CHF 24 million linked to the implementation of the Givaudan Business Solutions program. 

In the first six months of 2016, the Group recognized a one-off non-cash gain of CHF 55 million related to changes in pension plans. When measured in local currency terms, the EBITDA decreased by 5.3 percent. The EBITDA margin decreased to 24.0 percent in 2017 from 27.3 percent in 2016.

The operating income decreased by 2.3 percent to CHF 489 million from CHF 500 million for the same period in 2016. When measured in local currency terms, the operating income decreased by 0.9 percent. The operating margin decreased to 19.7 percent in 2017 from 21.4 percent in 2016.

Financial performance
Financing costs were CHF 21 million in the first half of 2017, versus CHF 27 million for the same period in 2016, with lower interest rates compensating for the increase in net debt in the Group. Other financial expense, net of income, was CHF 17 million in 2017 versus CHF 18 million in 2016.

The interim period income tax expense as a percentage of income before taxes was 15 percent in 2017, compared with 19 percent in 2016 for the same period.

While net income for the first six months of 2017 was CHF 384 million compared to CHF 368 million in 2016, an increase of 4.5 percent. This results in a net profit margin of 15.5 percent versus 15.7 percent in 2016. Basic earnings per share were CHF 41.70 versus CHF 40.00 for the same period in 2016.

Givaudan says its financial position remained strong at the end of June 2017. Net debt at June 2017 was CHF 1,429 million, up from CHF 930 million at December 2016. The leverage ratio was 28 percent compared to 19 percent at the end of 2016. The main reasons for the increase in the leverage ratio are associated with the recent acquisitions which have been made by the Group, the timing of capital expenditure on major investment projects and the payment of the CHF 515 million dividends in the first quarter of 2017.

Flavor Division
Flavor Division sales were CHF 1,346 million during the first six months of 2017, an increase of 4.4 percent on a like-for-like basis and an increase of 12.0 percent in Swiss francs compared to 2016. Including Spicetec, acquired in July 2016 and Activ International, acquired in January 2017, the growth was 13.6 percent in local currency.

The sales performance was driven by new wins and existing business expansion in North America, Europe, Middle East and Africa, as well as in Asia.

From a segment perspective, dairy, savory and beverages all contributed to the positive sales performance.

The EBITDA increased to CHF 321 million in 2017 from CHF 287 million for the first six months of 2016. The EBITDA margin was 23.9 percent in 2017, at the same level as the comparable period in 2016, with strong cost discipline offsetting the margin dilution impact from the acquired businesses. The operating income increased to CHF 258 million in 2017 from CHF 213 million for the same period in 2016. The operating margin increased to 19.2 percent in 2017 compared to 17.7 percent in 2016.

The company’s 2020 ambition is to create further value through profitable, responsible growth. Capitalizing on the success of the 2011-2015 strategy, Givaudan’s 2020 ambition is built on the three strategic pillars of ‘growing with our customers’, ‘delivering with excellence’, and ‘partnering for shared success’. 

Ambitious financial targets are a fundamental part of Givaudan’s strategy and it aims to outpace the market with 4-5 percent sales growth and a free cash flow of 12-17 percent of sales, both measured as an average over the five-year period of the company’s strategy cycle.