HOLZMINDEN (dpa-AFX) - The manufacturer of fragrances and flavors Symrise is feeling the effects of a delayed reduction in inventories and negative currency effects. Due to lower raw material prices, inventories also had to be devalued, the DAX-listed company announced on Thursday evening. Symrise is now taking a more cautious view of profit margins in the current year, although sales growth from its own resources is better than planned. Here, the management around CEO Heinz-Jürgen Bertram raised the annual target. However, the company will fall short of analysts' expectations in 2023. The Symrise share price collapsed on Friday.

Shortly after the start of trading, the share fell by around nine percent to 96.62 euros. The small annual profit is thus gone again. For 2023, this results in a drop of almost 5 percent, which means a place in the bottom quarter of the leading German index. The Dax has risen by a good fifth so far this year.

In the long term, however, things look better for Symrise. The Group started at the end of 2006 with a share price of 17.25 euros on the stock exchange. The increase since then still adds up to 460 percent - despite the setback from the record high of almost 133 euros towards the end of 2021. The Dax has risen by around 170 percent in the same period - even though the leading index takes dividend payments into account.

Symrise's management is now somewhat less optimistic with regard to profitability: the adjusted earnings margin before interest, taxes, depreciation and amortization (EBITDA) and before special items is now expected to reach 19 to 19.5 percent in 2023, instead of around 20 percent as previously planned. Excluding exchange rate effects and the purchase and sale of parts of the company, turnover is expected to grow by more than 7% in the current year. The previous target was 5 to 7 percent.

This would result in annual turnover of around 4.7 billion euros, the statement continued. In 2022 it was 4.6 billion. Analysts expect average revenue of almost 4.8 billion euros and an operating profit margin of 19.9% for 2023.

The stronger euro had already eaten up some of the organic growth in the first nine months of the current year. Although Symrise achieved 7.4 percent revenue growth on its own, thanks in part to demand for food additives, fine fragrances and cosmetic ingredients, this ultimately left 3.3 percent nominal growth.

In an initial reaction to the lowered margin targets, analyst Charlie Bentley from investment firm Jefferies emphasized that organic growth is likely to have slowed in the final quarter. He now expects more than 5.8 percent. Although this is more than generally expected, it is less than he had previously thought.

For expert Gunther Zechmann from analyst firm Bernstein Research, the company's target adjustment confirms that the sales trend has bottomed out. Nevertheless, the new margin outlook means that the market's profit expectations are falling. However, Zechmann explains that a large part of the headwind for profitability - such as write-downs on inventories in the animal feed segment - is of a temporary nature. The expert therefore sees little cause for concern.

More worrying, according to the Bernstein analyst, would be a continued weakness in the Aroma Molecules segment. This segment had been under pressure in the first nine months of the year, as demand for fragrances and menthol was sluggish due to continued destocking by customers. A fire at the US site in Colonel Island, which has since been repaired, also had a negative impact. Further weakness in the division could make it more difficult for Symrise to achieve its 2024 targets, according to Zechmann.

Meanwhile, the company from Lower Saxony confirmed its medium-term targets on Thursday evening "due to good demand" at Group level. Accordingly, annual organic growth of 5 to 7 percent on average is to be achieved by 2028. Profitability (EBITDA margin) is expected to be in the range of 20 to 23 percent.

However, a company spokesperson declined to comment on how the Aroma Molecules segment performed in the final quarter when asked. Details will be provided at the latest when the annual figures are presented on March 6.

Meanwhile, Symrise has increased its stake in pet food specialist Swedencare in recent months. It now holds around 35 percent, as a spokesperson recently explained when asked.

In June, the DAX-listed company had to submit a mandatory takeover bid for the Swedes after reaching the 30 percent threshold. However, this was unattractive from the point of view of Swedencare shareholders, and the company itself did not see its long-term potential adequately reflected. However, mandatory offers are often designed in such a way that shareholders are not offered an attractive premium. The major shareholder then often slowly increases its stake.

Symrise acquired a stake in Swedencare in 2021. Pet food products are an important growth driver in the industry. However, in the wake of rising interest rates on the capital markets, Swedencare's share price collapsed by a good 80 percent in 2022, similar to the share prices of many growth companies. Due to the slump in the share price, Symrise had to write off 126 million euros on its then almost 30 percent stake at the end of 2022. However, the Swedencare share price recovered strongly in 2023, doubling again./mis/tav/jha/