Bloomberg News

Givaudan Drops Most in a Year on Operational Profit Miss

August 03, 2012

Givaudan SA (GIVN), the Swiss-maker of flavorings for Nestle SA (NESN) and Danone SA (BN), dropped the most in a year after reporting first-half earnings below analysts’ estimates.

Earnings before interest, taxes, depreciation and amortization increased 12 percent to 428 million francs ($435 million), missing the 451.7 million-franc average of estimates compiled by Bloomberg. Givaudan dropped as much as 5.5 percent to 901.5 francs, its steepest intraday plunge since Aug. 4.

“It’s a bit light: the first-half is weak and in the second half of the year I don’t think we will see a sharp rebound,” Jean-Philippe Bertschy, an analyst at Vontobel in Geneva, said by telephone.

The world’s largest flavor and fragrance maker, which holds a quarter of the market, aims to lure customers away from smaller rivals as cash-strapped consumers in Europe spend less on food, drinks and care products. Danone, the world’s biggest yogurt-maker cut its full-year forecast for profit margins in June, and said it saw rapid deterioration in consumer demand in Spain.

Shares of the Swiss company were 4.6 percent lower at 910 francs as of 11:55 a.m. in Zurich.

“I’m a bit surprised by the market reaction,” Chief Financial Officer Matthias Waehren said in an interview. He said part of the Ebitda miss came from using raw materials purchased at high prices last year.

Givaudan is pushing through its planned 100 million francs of price increases this year and has gained market share from smaller local and regional rivals, Waehren said. The company has a visibility of four to eight weeks on orders and has seen “no change” in customer trends.

Additional pension costs and costly delays to a new Hungarian facility also weighed on profitability. Givaudan reiterated its annual target for sales growth of 4.5 percent to 5.5 percent through 2015.

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

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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