Givaudan eyes restructuring as key to profitable growth

By Simon Pitman

- Last updated on GMT

Related tags Cent Marketing

Fragrance and flavours giant Givaudan says that restructuring as well as a continued focus on key trends and new markets will be the driving force behind future growth.

“Following the successful integration of Quest, we are entering the next era of profitable growth for the business,”​ said CEO Gilles Andrier.

Givaudan bought Quest back in 2007, a move that further consolidated its position as one of the major players in the global fragrance and flavours industry.

Since the acquisition the company has concentrated on integrating the operations into the business, but now that has been successfully completed, the company can turn its attention to further growing the business.

Eyeing above market average annual growth

“The overall objective is to grow organically between 4.5 per cent and 5.5 per cent per annum, based on assumed market growth of 2 per cent to 3 per cent, and to continue on our path of market share gain over the next five years,”​ Andrier said.

The growth ambitions will continue to focus on leveraging the company’s position in developing markets. Currently sales from these markets represent approximately 41 per cent of total turnover, but the plan is to extend this to 50 per cent of turnover by 2015.

“Likewise, the company will continue to clue in on the naturals trend, which is driving sales of healthier food ingredients, together with sales of natural fragrances, particularly at the luxury end of the market,”​ said company spokesperson Peter Wullschleger.

Focus on production efficiencies

On top of growing revenues, the company is also focusing on restructuring the business, in particular by focusing on production efficiencies, in an effort to increase profit margins.

This will involve the closure of the company’s flavours production facility in the North-West of England, subject to employee consultation, as well as the realignment of its flavours facility in Switzerland.

According to Wullschleger production from these facilities will then shift to a Greenfield site in Hungary, which the company will be shortly opening following an investment of CHF 170m (€130m).

Restructuring to boost cash flow and profit margin

The restructuring of the production facilities is expected to maintain Givaudan’s industry-leading EBITDA margin, while improving annual free cash flow to between 14 – 16 per cent of annual sales by 2015.

Further efficiencies will come from the introduction of the company’s new SAP system, which will result in the ‘streamlining’ of positions in the back offices.

In 2009 Givaudan reported fragrance sales of CHF 1.8bn, accounting for approximately 25 per cent of the global market, currently estimated to be worth CHF 7.5bn a year. This figure represented approximately 45 per cent of group sales, given that sales of flavours amounted to CHF 2.1bn in the same year.

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