Symrise Defends Margins With Medical Nutrition, Menthol

Symrise AG (SY1), the fourth-largest flavor and fragrance maker, will defend profitability that’s the highest in its field by expanding production of menthol and ingredients for medical nutrition as raw material prices rise.

Earnings before interest, taxes, depreciation and amortization amounted to 20 percent of sales in 2011, down from 21.1 percent a year earlier, yet beating the margins of competitors, the Holzminden, Germany-based company said today.

“Look at our rivals -- none of them managed a margin of 20 percent last year,” Chief Executive Officer Heinz-Juergen Bertram told journalists in Frankfurt. “Our strategy of backward integration helps us, and we plan to do more of that.”

The Ebitda margin will remain at the 2011 level this year and next, while sales will increase between 2 percent and 4 percent in both years, Symrise forecast. Unlike competitors, Symrise has its own production for key ingredients including citrus and mint flavors, onion oil and vanilla, which complements its purchasing.

Givaudan SA (GIVN)’s Ebitda margin was 19.4 percent last year after higher raw-material costs and restructuring. Closely-held Firmenich International SA does not publish data on profitability.

“We don’t believe in raw-material prices coming down a lot this year, like many others,´´ Chief Financial Officer Bernd Hirsch said. “We believe they will rise moderately this year.”

Shares Decline

Symrise’s guidance for 2012 “doesn’t provide any potential for a significant upward revision on our estimates,” Nadeshda Demidova, an analyst at Equinet in Frankfurt, wrote in a note to clients today. She cut her recommendation on the shares to “hold” from “accumulate.”

The company’s shares fell 5.7 percent to 21.16 euros in Frankfurt, the biggest decline since Aug. 4.

CEO Bertram said that the price of menthol was $20 to $25 per kilogram last year, jumped to $75 three weeks ago, and was about $50 at the beginning of this week.

“These are extremely volatile markets, and since we are the largest consumer of menthol, we also want to be the largest producer,” Bertram said.

Symrise will double menthol production facilities at Holzminden this year, and its partnership with Indevex Biotech will add expertise for medical nutrition, Bertram said.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.