Givaudan Profit Beats Estimates as CEO Prepares Strategy

Givaudan SA, the world’s largest flavors and fragrance company, reported a surprise increase in first-half profit, bolstered by demand from the dairy and beverages industry in North America. The shares gained the most in 18 months.

Earnings before interest, taxes, depreciation and amortization was 566 million francs ($591 million), compared with 562 million francs a year earlier, the Vernier, Switzerland-based company said in a statement on Friday. Analysts had predicted a decline to 531 million francs.

The result is a boost for Chief Executive Officer Gilles Andrier as Givaudan shares have lagged behind competitors this year. Now in his 11th year at the helm, Andrier is in the process of preparing a strategy to take the company through to 2020, and plans to update investors at the end of August.

“It’s always better to have a good, positive environment around you when you explain where you are going to go for the next five years,” Andrier said by phone.

Givaudan shares jumped as much as 5.8 percent, the most since January 2014, and traded 4.7 percent higher at 1,763 francs as of 10:47 a.m. in Zurich. Prior to Friday, the stock had declined 3.5 percent this year. Competitors Symrise AG and International Flavors & Fragrances Inc. have added 18 percent and 12 percent, respectively.

Strategy Update

Andrier said the 2020 strategy will resemble the previous five-year outlook, and will touch on how Givaudan will seek to stay ahead of the competition.

“It’s not going to be an upside-down revolution,” said the CEO. “We believe we have a good business model which we can build on.”

One challenge is finding a way to profitably supply a new breed of small and mid-sized customer that are both fast-growing and innovative, Andreas Fibig, CEO of IFF, said June 2. Another obstacle is tougher regulations surrounding the ingredients industry.

Andrier said there’s no indication that the challenging markets will improve. Asia has slowed and there are question marks hanging over Latin America, where demand from the beverage, dairy and snack market helped spur like-for-like sales growth of 6.9 percent at the flavors division.

Givaudan revenue was little changed at 2.18 billion francs, with an increase in flavorings offsetting a decline in fragrances. Free cash flow increased to 11.4 percent of sales, up from 8.1 percent.

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