By John Revill
ZURICH-- Givaudan SA said Thursday it expected market conditions
to remain tough in 2015 as the world's largest fragrance and flavor
maker reported a 15% rise in full-year earnings driven by faster
growth in developing countries.
Givaudan has benefited from increased demand for flavors for
snacks and ready-to-eat dishes, and for fragrances for perfumes and
cleaning products, particularly in emerging markets like
Brazil.
The Geneva-based company, whose customers include Nestlé SA and
Mondelez International Inc., said on Thursday that net profit rose
to 563 million Swiss francs ($619 million) from 490 million francs
a year earlier, broadly in line with analysts' expectations.
Revenue edged higher to 4.40 billion francs from 4.37 billion
francs a year earlier.
Adjusted for currency swings and acquisitions, revenue rose 7%
in developing markets during the year, outpacing the 1.1% rise in
Europe and North America.
"It was a good performance in a difficult environment," said
Chief Executive Gilles Andrier, noting the gap between developing
markets and developed markets had never been as wide.
There had been a "certain slowdown" in developing markets in
Asia, he noted, but this was offset by growth in Latin America and
the Middle East.
Globally there had been a slowdown in sales momentum during the
fourth quarter, which the CEO attributed to easing of demand in
Asia, especially for fragrances in China and some clients reducing
their inventories towards the end of the year.
"We don't see any specific improvement in market conditions in
2015," Mr. Andrier said in an interview. "Europe is a tough
environment; everyone talks about the U.S. coming back, but we
don't see it yet."
Givaudan expects so-called organic revenue growth, stripping out
the impact of currency fluctuations and acquisitions, of 4.5% to
5.5% a year, as long as the overall market grows between 2% and
3%.
Developing markets now make up 46% of the company's sales, up
from 45% a year earlier, with Latin America the standout performer,
increasing sales by 11%. In contrast, Givaudan struggled to eke out
gains in North America, with revenue up just 0.6%, while in Europe,
revenue rose 2.5%.
Givaudan's performance provides some insight into the health of
the food-makers and perfume-makers that it supplies with
fragrances. The company, which currently holds a roughly 25% share
of the overall industry, makes perfumes such as Far Away Gold by
Avon, and Polo Red for Men by Ralph Lauren.
Mr. Andrier said the recent surge in the Swiss franc versus the
euro wouldn't affect the business. The franc has risen around 20%
since the Swiss central bank scrapped a long-standing cap on the
currency.
"We don't manage our company according to the exchange rate,"
Mr. Andrier said in an interview. "We are not going to increase
salaries by 10% in Switzerland, but we will continue as normal,
with no sudden steps, " he said, adding there were no job cuts
planned in Switzerland because of the currency's rise which makes
the Alpine country a more expensive location.
Raw materials would likely rise by 1%-2% in 2015, he added,
following a 1% rise in 2014. Givaudan uses 14,000 different
materials to make its products, which range from flavorings for
yogurt and drinks to fragrances for soaps and washing powders.
Write to John Revill at john.revill@wsj.com
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