Givaudan Sales Miss Estimates on Weak Fine Fragrances Demand

Givaudan SA, the world’s largest maker of flavorings, reported first-quarter sales that missed analyst estimates on weak demand for fine fragrances.

Revenue gained 2.7 percent to 1.09 billion francs ($1.17 billion), the Geneva-based company said in a statement today. The average estimate by analysts in a Bloomberg survey was for

1.12 billion francs. The stock declined as much as 2.8 percent.

The quarterly results are a setback for Chief Executive Officer Gilles Andrier, who aims for sales growth at about double the market rate even as Europe’s financial difficulties weigh on demand for snacks and perfumes. Givaudan, which holds a quarter of the market, said today that sales of fine fragrances used in perfumes declined 5.5 percent in the quarter.

“Weakness in consumer confidence in Europe, and to a degree in North America, and strong comparables from last year will make it difficult for the company to grow at 5 percent and more this year,” Berenberg analyst Jaideep Pandya said.

Givaudan declined as much as 32 francs to 1,110 francs in Zurich trading and was down 2.3 percent as of 9:26 a.m., valuing the company at 10.3 billion francs. The stock had risen 19 percent this year before today, while the benchmark Swiss Market Index gained 14 percent.

The company said it’s mid-term objective is still to grow organically between 4.5 percent and 5.5 percent per year, assuming a market growth of 2 percent to 3 percent.

Givaudan also reiterated its pledge 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.

In the fragrance division, sales grew 3.6 percent to 517.1 million francs while revenue in the flavour division gained 1.9 percent to 571.8 million francs.