Givaudan’s Financial Position Remained Strong

Strongly improved free cash flow, on track to achieve 2015 targets.

The Luxonomist. 24/07/2015
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Givaudan Group (Photo: givaudan.com) Click for more information

Givaudan Group sales for the first six months of the year were CHF 2,184 million, an increase of 1.3% on a like-for-like basis and a decline of 0.3% in Swiss francs. Fragrance Division sales were CHF 1,023 million, flat on a like-for-like basis and a decline of 1.1% in Swiss francs. Flavour Division sales were CHF 1,161 million, an increase of 2.6% on a like-for-like basis and 0.4% in Swiss francs.

The gross margin was 46.5% in 2015 compared to 46.6% in 2014. Savings from the transfer of products to the new flavours manufacturing facility in Makó, Hungary from Kemptthal, Switzerland more than offset general increases in operational expenses. However, the gross margin was distorted by the impact of currency movements following the appreciation of the Swiss franc.

The EBITDA increased by 0.6% to CHF 566 million from CHF 562 million for the same period in 2014. A continued focus on internal costs was the main enabler of the improvement. In the first six months of 2015 the Group recognised a net one-off non-cash gain of CHF 20 million, mainly following a change in pension plans. As a reminder, in the first six months of 2014 the Group recognised a one-off gain of CHF 38 million in the Flavour Division on the disposal of land at its Dübendorf location in Switzerland. When measured in local currency terms, the EBITDA increased by 6.4%. The EBITDA margin increased to 25.9% in 2015 from 25.6% in 2014.

The operating income increased by 1.6% to CHF 428 million from CHF 422 million for the same period in 2014. When measured in local currency terms, the operating income increased by 8.8%. The operating margin increased to 19.6% in 2015 from 19.2% in 2014.

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Givaudan Group (Photo: givaudan.com) Click for more information

Financing costs were CHF 31 million in the first half of 2015, versus CHF 32 million for the same period in 2014. The decrease was as a result of the lower net debt in the Group. Other financial expense, net of income, was CHF 16 million in 2015 versus CHF 14 million in 2014.

The interim period income tax expense as a percentage of income before taxes was 11%, considerably lower than in 2014 following changes in Swiss Accounting Law and the Group’s operating structure. Excluding these items, the income tax expense as a percentage of income before taxes was 19%.

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Givaudan Group (Photo: givaudan.com) Click for more information

The net income for the first six months of 2015 was CHF 339 million compared to CHF 305 million in 2014, an increase of 11.2%. This results in a net profit margin of 15.5% versus 13.9% in 2014. Basic earnings per share were CHF 36.82 versus CHF 33.13 for the same period in 2014.

Operating cash flow after net investments was CHF 267 million, versus the CHF 207 million recorded in 2014. Free cash flow, defined as operating cash flow after investments and interest paid, was CHF 248 million in the first half of 2015, versus CHF 178 million for the comparable period in 2014. As a percentage of sales, free cash flow in the first six months of 2015 was 11.4%, compared to 8.1% in 2014.

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Givaudan Group (Photo: givaudan.com) Click for more information

On a regional basis the business delivered growth in both mature and developing markets.  In the developing markets, a combination of new business and volume growth in Asia and the Middle East more than compensated for lower sales in Latin America, which were impacted by a weak market in Brazil. In the mature markets, sales growth in Western Europe was favourably impacted by a strong inflow of new business. This growth more than offset lower sales in North America where new business was not able to offset erosion.

At the major industry award ceremonies in Europe and the USA, a number of Givaudan fragrances received recognition including: A Thousand Wishes by Bath and Body Works, Tom Ford’s Velvet Orchid and Mandarino Di Amalfi, Intoxicated by Kilian, Bottega Veneta Pour Homme Eau Extreme, Bottega Veneta Knot, Christian Dior Miss Dior Blooming Bouquet, Narciso by Narciso Rodriguez.  In addition, J’Adore received a Hall of Fame award at the ceremonies in the USA.

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Givaudan Group (Photo: givaudan.com) Click for more information

Sales of Fragrance and Cosmetic Ingredients decreased by 7.9% on a like-for-like basis, mainly affected by lower commodity sales. The sales of Soliance, which was acquired on 2 June 2014, were CHF 17 million for the first six months of 2015, growing double-digit in local currency when compared to the same period of last year. Including Soliance, the growth of Fragrance and Cosmetic Ingredients was 4.0% in local currency.

All product categories in Fragrance Ingredients declined, however, the specialities business was the least impacted. The earlier announced product transfers to the production site in Mexico and the joint venture partner in China are on schedule and will continue to ensure that the Group remains competitive in the fragrance ingredients market.

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