Givaudan holds onto number one slot
number one flavours and fragrance group Givaudan felt the squeeze
on the gross profit margin as the lower US dollar and sharp
increases in raw materials cut into the bottom line for 2003.
Net income for the manufacturer came in at SF216 million (€139m) on the back of a 1.5 per cent rise in sales to SF2.72 billion, up 9 per cent in local currencies.
Despite a downward squeeze on margins, the Swiss company reported stable growth - 11.8 per cent in local currencies and 3.5 per cent in Swiss Francs - in the flavours division with sales reaching SF1.6 billion (€1bn), including sales from the flavour business - FIS - bought from Nestlé in 2002.
'All regions and the major business segments, beverages, savoury, confectionary and dairy, contributed to this growth. Latin America grew at a double digit rate while Europe, Middle East and Africa grew in the high single digits, followed by Asia Pacific and North America,' said the flavours firm in a statement yesterday.
Without providing details the group said 'improvements in manufacturing efficiency' helped offset the impact of 'negative exchange rate developments' and increased raw material prices.
Although the number one global flavours supplier continues to deliver stable growth the company is heavily exposed to currency conversions notably because North America accounts for a third of all sales, in addition to high raw material prices and the cost of acquisitions.
At the end of 2003 Givaudan, weighed down by these factors, took a SF68 million (€43m) charge and axed 300 jobs. Integrating FIS, the food ingredients unit bought from Nestle more than a year ago, and the US dairy flavours company IBF purchased shortly afterwards, has knocked operating margins for the group.
"Since the FIS acquisition, programmes have been underway to bring back the savoury margins to pre-acquisition levels," said the Swiss company in January this year. The firm added that the restructuring costs would total SF68m, reflected in 2003 results.
With around a third of sales in North America, where it competes with leading flavours player International Flavours and Fragrances, Givaudan - keen to guard its number one global flavours slot recently grasped from IFF - has suffered from the rise in the franc.
Major players dominate the global flavours business and are keen to keep up their market share. "The flavours and fragrances industry is a thoroughly global business, where the largest nine players are responsible for 75 per cent of the world market and are present in virtually all the national markets," Fabio Albertario, senior analyst at IAL Consultants told FoodNavigator.com. But competition is tough in the €4.2 billion global flavours market. The largest private business in the US, Cargill, has just bought UK flavours firm Duckworth and leading Danish ingredients company Danisco has publicised clear ambitions to carry its flavours division into the band of top five global flavours players.
