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Givaudan expects 4-5% sales growth this year after strong 2019

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01/24/2020 | 04:09am EST
FILE PHOTO: Logo of Givaudan is seen in Kemptthal

Fragrance and flavour maker Givaudan said it was confident of delivering like-for-like sales growth of between 4% and 5% this year, within its mid-term target range, implying a slowdown from 5.8% growth last year that benefited from price increases.

"We have a five-year strategy and we're very confident we'll deliver on that, so 4 to 5% on top line," Chief Financial Officer Tom Hallam told Reuters by phone on Friday.

"We will not have any new price increases, but we continue to see good demand in high-growth markets. Confidence in the U.S. is good and a lot of the questions we had in Europe in 2019, like Brexit, are behind us," Hallam said.

Givaudan, which develops tastes and scents for customers in the consumer and luxury goods industry, has been benefiting from its focus on natural ingredients and health and wellness products, and from recent trends requiring new flavours like plant-based meat alternatives.

But the company's business with its big global customers has slowed and local and regional customers now represent more than half of its sales.

"Large customers continue to struggle to eke out growth in some of these big markets (like North America)," Hallam said.

Shares in Givaudan, which hit a record on Wednesday after rising more than a third last year, were down 2.1% at 0813 GMT, lagging a 0.4% increase in the Swiss blue-chip index.

Analysts pointed to slowing growth in the final quarter but welcomed the margin improvement in the second half and cash development.

Net profit rose 6.0% to 702 million Swiss francs (552.04 million pounds) in 2019, while organic growth, excluding acquisitions and currency swings, accelerated to 5.8% from 5.6% a year ago.

Growth slowed in the final quarter as the impact from price hikes faded, Hallam said. Raw material prices should remain at current levels in 2020, after two years of strong increases.

The company, which competes with Germany's Symrise and U.S.-based International Flavors & Fragrances, has spent about 3.6 billion francs on acquisitions since 2014 and could continue to do bolt-on acquisitions, Hallam said.

Sales in the fragrance division rose 7.3%, boosted by strong demand for fragrances for consumer products in the Americas, while sales in the flavours unit were up 4.5%, dragged down by a weak performance in North America.

The company said it would raise its dividend 3.3% to 62 francs per share for 2019 and said it wanted to maintain its current dividend practice.

(Editing by Michael Shields and David Holmes)

By Silke Koltrowitz

Stocks mentioned in the article
ChangeLast1st jan.
EURO / BRITISH POUND (EUR/GBP) 0.01% 0.83629 Delayed Quote.-1.09%
FEEDER CATTLE?FUTURES (GF) - CMG (ELECTRONIC)/C1 0.05% 140.85 End-of-day quote.-4.15%
FRAGRANCE GROUP LIMITED 0.00% 0.14 End-of-day quote.7.69%
GIVAUDAN 0.77% 3395 Delayed Quote.12.01%
INTERNATIONAL FLAVORS & FRAGRANCES INC. -0.43% 134.26 Delayed Quote.4.51%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 0.08% 121.4 End-of-day quote.-2.63%
SYMRISE 0.37% 99 Delayed Quote.5.54%
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