Fragrance continues to be driving force for Givaudan

The company beat market expectations by announcing a 28 per cent jump in first-half net profits compared to the same period in 2005, to reach CHF215.7m (€137.2m) on the back of first half sales that were up 3.7 per cent in local currencies and 7.8 per cent in Swiss Francs, to reach CHF1.47bn.

The results have encouraged the company to confirm that it will remain 'an active player' in the continued consolidation of the sector, company chief executive Gilles Andrier confirmed in an interview with Reuters.

However, the results also showed that growth slowed down significantly in the second quarter, coming in slightly below market expectations.

This result caused the company's shares to slip slightly following the announcement, although the trend is still up for the year-to-date, with shares increasing by about 14 per cent since January.

The company did not break down the results for the two first half quarters.

Although flavours are still the mainstay for Givaudan, growth in the its fragrance division is continuing to drive the results.

Currently flavours accounts for 59 per cent of the of its business, but in the first half growth stood at 2.6 per cent in local currencies to reach CHF 868m.

The picture in the fragrance division faired significantly better, with sales growing by 5.4 per cent in local currencies to reach CHF606m.

The company said the performance was driven by strong results for the fine fragrance operations in Europe and the US, which expanded at a double digit rate during the six month period thanks to several new product launches.

It also pointed out that fragrances for consumer products experienced significant growth in Nothern America and the Asia Pacific region and that it had also had new wins in the China market.

Meanwhile, specialty ingredients also showed strong results, with five ingredients in this category proving to be amongst the company's top-selling ingredients.

Givaudan said it believed that the profitability of the fragrance division is likely to be boosted thanks by lower forecasts for price increase in raw materials in the second half.

It said that raw material costs will increase by 2 - 3 per cent for the fragrance division and 3 - 4 per cent for the flavours division.

Looking ahead to the full year results, the company beleives it will continue to outgrow the market performance within the fragrance and flavours sector on the strength of strong sales comparables and continued improvements in operation margins.