Givaudan shares jump 5.8 percent as company reports surprise 11.2 percent increase in 1H net profit

Givaudan shares jump 5.8 percent as company reports surprise 11.2 percent increase in 1H net profit

Givaudan’s cost-cutting efforts have clearly paid off as the flavors and fragrance producer announced an 11.2 percent increase in net profit for the first half of 2015. Net profit for the six months to June 30 rose from CHF305 million in 2014 to CHF339 million this year.

Earnings also beat expectations, gaining 0.6 percent to reach CHF566 million. Analysts had predicted a decline to CHF531 million as the world’s largest fragrance and flavors maker has been hit by the appreciation of the Swiss Franc, ‘distorting’ its efforts make cost savings through relocating its flavors manufacturing facility to Hungary and revisiting its pension scheme.

The positive news was reflected in the markets, as Givaudan’s shares gained as much as 5.8 percent on Friday, the highest jump since January 2014.

Sales were flat for the first half of 2015, rising 1.3 percent on a like-for-like basis to CHF2.2 million (a decrease of 0.3 percent in Swiss Francs). Sales for the company’s fragrance compounds division, which includes both fine fragrances and consumer products) increased by 1 percent on a like-for-like basis, helped by a good performance in developing markets on the consumer products side, although weak sales in Latin America affected growth in the fine fragrance division, which put on 0.8 percent thanks to a strong performance in Asia and the Middle East.

A number of Givaudan fragrances were recognised at awards ceremonies in the first half of the year, including Bottega Veneta Knot (Coty), Tom Ford’s Velvet Orchid and Mandarino Di Amalfi (Estée Lauder), Miss Dior Blooming Bouquet (Christian Dior/LVMH), and Narciso by Narciso Rodriguez (BPI).

The company’s acquisition of Soliance helped boost its fragrance and cosmetics ingredients division, which grew 4 percent in local currency when Soliance’s first-half sales are taken into account. Product transfers to Givaudan’s production site in Mexico and a joint venture in China will help the group remain competitive going forward.

CEO Gilles Andrier is currently in the process of preparing the company’s strategy for the next five years and is expected to update shareholders in August. The plan for the five years to 2020 is expected to be broadly similar to the previous five-year outlook. “It’s not going to be an upside-down revolution,” said Andrier. “We believe we have a good business model which we can build on.”