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Symrise Rewarded for Picky Approach to Clients With Margin Beat

Symrise AG, the German maker of perfume for Dior’s Fahrenheit, reported better-than-expected profitability in the third quarter after seeking to weed out low-margin contracts with customers.

Earnings before interest, tax, depreciation and amortization equaled 20.3 percent of sales in the third quarter, beating WestLB’s 19.7 percent estimate, according to analyst Norbert Barth. The Holzminden-based company’s full-year target remains 20 percent.

“Symrise is consciously declining unprofitable business in certain cases to protect margins,” Thomas Maul, a Frankfurt-based analyst at DZ Bank AG, said in a note to clients. “We welcome this strategy.” Maul reiterated his “buy” rating on the stock.

Symrise, like larger U.S. rival International Flavors & Fragrances Inc., said it has seen customers become more cautious in their orders. The German company is responding to lower demand in consumer related areas such as luxury perfumes by running down its raw-material inventories, it said today.

Symrise shares rose as much as 6.3 percent in Frankfurt trading and were up 4.8 percent to 18.49 euros as of 10:40 a.m. Symrise has lost 9.9 percent this year for a market value of 2.18 billion euros ($3 billion).

Symrise pared its full-year sales outlook, saying it now expects annual sales growth of 2 percent to 3 percent in local currency. It had targeted 3 percent growth. Third-quarter sales fell 3.8 percent to 394.5 million euros, missing a 404.1 million-euro estimate in a Bloomberg survey.

Earnings before interest and tax dropped 10 percent to 61.4 million euros while net income rose 4 percent to 40 million euros in the quarter. Analysts had expected Ebit of 59.1 million euros and net income of 36.9 million euros.

“Symrise concentrated on strict cost management throughout the entire group and on a conscious discontinuation from activities with weak margins,” Chief Executive Officer Heinz-Juergen Bertram said in the statement. “We saw customers returning to more careful order patterns in certain regions and sectors.”

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