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Givaudan Pledges Bumper Dividend as Annual Profits Surge

Givaudan SA (GIVN), the world’s largest maker of flavorings and fragrances, announced a bigger-than- estimated dividend after riding out a year of high raw-material prices and a strong Swiss franc.

Net income rose 63 percent to 411 million francs ($451.6 million), beating the average estimate of 387.5 million francs based on 11 analyst predictions collected by Bloomberg. Givaudan said it plans to pay a dividend of 36 francs, beating a Bloomberg analyst forecast of 25 francs.

“We are doing a step change in our dividend this year,” Chief Executive Officer Gilles Andrier said in a phone interview. “Our goal is to continue doing that in the years to come. We want a continuous improvement.”

Andrier has paid down debt, allowing him to deliver on a 2010 promise to return more cash to shareholders. Givaudan, which holds a quarter of the market, is aiming for sales growth at about double the market rate even as Europe’s financial difficulties weigh on demand for snacks and perfumes.

Givaudan’s shares climbed as much as 4.3 percent to 1,055 francs, the biggest intraday gain since November 2011. The advance gives the Swiss company a market value of 9.7 billion francs. The stock traded at 1,051 francs as of 9:37 a.m.

After finalizing costly projects, such as the roll-out of new SAP management software last year and completing the integration of Quest, which it acquired for about $2.3 billion in 2006, Givaudan can now “fully concentrate” on improving cash flow, Andrier said.

Competitors Lagging

Sales advanced 8.6 percent to 4.26 billion francs, the Geneva-based company said, in line with estimates. Andrier said he believes Givaudan is growing twice as fast as Firmenich International SA, 30 percent to 40 percent faster than Symrise AG (SY1), and 20 percent faster than International Flavors & Fragrances Inc. (IFF)

Expectations of an increase in the dividend payout have helped the stock rise 9 percent in the last three months, Jaideep Pandya, an analyst at Berenberg said in a note to clients yesterday.

The Swiss company pledged to return above 60 percent of free cash flow to shareholders once a targeted leverage ratio -- defined as net debt, divided by net debt plus equity -- of 25 percent has been reached. Chief Financial Officer Matthias Waehren said Aug. 3 that the target could be reached by this quarter.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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