Symrise results affected by high raw material costs

By Katie Bird

- Last updated on GMT

Related tags Cent Aroma compound United states dollar

Symrise has reported a sales increase for the first quarter of 2008
led mainly by emerging markets but bottom line figures suffered due
to higher energy and raw material costs.

Sales for the Germany-based flavour and fragrance player increased by 2 per cent on last year's first quarter to reach €338m, representing growth of 6.4 per cent on a local currency basis.

The company's scent and care division reported a 3.7 per cent increase in sales in local currencies or a decrease of 0.9 per cent in actual currencies to reach €179.8m.

However, it was the flavour and nutrition division that led the way with a 9.7 per cent sales growth in local currencies to reach €158.2m.

Overall though the company's bottom line suffered with net income decreasing by 14.7 per cent from €29.2m to €24.9m due to increased energy and raw material costs.

Emerging markets drive growth

The company enjoyed strong growth in emerging markets, notably Russia which reported a 23.8 per cent sales increase in local currencies.

The scent and care division reported particularly strong sales in the Asia-Pacific region with an increase of 7.1 per cent on last year's figures.

However, the South American performance for the division was still suffering from the effects of lost business in the second half of 2007 with a 6.4 per cent decrease in sales.

In contrast, the company's flavour and nutrition division reported a 17.5 per cent increase in sales in the region mainly due to growth in the savoury and beverage sectors.

Furthermore, within the Asia and Pacific region where sales for the division grew by 14 per cent, Japan led the region reporting sales growth of 57.8 per cent due to a new product launch.

Price increases to cushion increased costs An increase in energy costs (estimated to amount to €0.6m) and rising raw material costs led to increased costs of sales, reported the company.

This coupled with an unfavourable product mix decreased gross margin from 46.9 per cent to 46.5 per cent.

According to the company rising raw material costs were offset by more efficient manufacturing practices and also the 'divisions are focused on recovering margin through price increases.'

Predictions for the year ahead Notwithstanding the expectations of continued currency fluctuations and an increasingly unstable economic environment, the company has reaffirmed its 2008 predictions.

Symrise has predicted that the flavour and fragrances market as a whole will grow between 2.5 and 3 per cent despite the increasing raw material and energy costs and the potential effects of the US credit crunch.

The projected growth will be driven by a moderately growing consumer climate and the surge in consumer demand in newly industrialised countries, according to Symrise who reaffirmed its predictions for 2008 of 5-6 per cent sales growth and 10 per cent EBITA growth on a local currency basis.

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