Givaudan first half sales drop although it sees ‘encouraging recovery signs’

By Katie Bird

- Last updated on GMT

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Fragrance and flavour supplier Givaudan blames a drop in sales on destocking and lower consumer demand, although it said second quarter results show a slight recovery.

The Swiss-based ingredients manufacturer said sales for the first six months of 2009 totalled Swiss Francs (CHF) 1.996bn (€1.30bn), a decrease of 0.9 per cent in local currencies and 4.7 per cent in Swiss francs compared to last year’s figures.

Performance looked up slightly in the second quarter, with sales growing 0.9 per cent in local currencies compared to the decline of 2.1 per cent recorded in the first quarter.

Gross profit for the period declined from CHF974m to CHF896m and as a percentage of sales gross profit dropped from 46.5 per cent to 44.9 per cent.

The company said this was due to strong increases in raw materials, energy and transportation costs in the second half of 2008. In addition, Givaudan said the positive effect of declining commodity costs will not be felt immediately as they must work their way through the supply chain.

Fine fragrances suffer

Reflecting the recent performance of many of the company’s competitors, the fragrance division, especially fine fragrances, has suffered most under the global recession.

Sales for the fragrance division dropped to CHF899m, which is a decrease of 2.3 per cent in local currencies and 6.6 per cent in Swiss francs compared to last year’s figures.

Destocking affected fine fragrances and fragrance ingredients more than consumer products, according to the company, and the former suffered further from low consumer demand at the retail level.

Like the company’s performance overall, second quarter figures in the division were generally higher than first quarter, but Givaudan remains cautious about the near future of fine fragrances.

“During the second quarter, sales erosion slowed down in Europe and North America, indicating a possible end to the destocking but the lack of consumer confidence and continued reduced travel activity is likely to continue impacting Fine Fragrance sales throughout 2009,”​ it said in its half year report.

Flavours get a boost from new markets

Flavours performed slightly better for the company posting an increase in sales in local currencies, although taking currency effects into account dragged results down.

The division makes up just over half of the company’s sales and figures for the six months were up 0.2 per cent in local currencies at CHF1.097bn.

North American and European markets were affected by soft consumer demand, according to Givaudan, whereas sales in Asia Pacific grew at a single digit figures mainly driven by strong performance in new markets such as India.

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