• Sales of CHF 3,094 million, up 6.3% on a like-for-like¹ basis and 15.7% in Swiss francs
• Project pipeline and win rates sustained at a high level
• Strategic focus areas and acquired businesses strongly contributing to growth
• EBITDA of CHF 660 million in 2019, an increase of 9.9% compared to 2018
• EBITDA margin of 21.3%, with solid underlying business performance
• Net income of CHF 380 million, up by 2.3% year-on-year
• Free cash flow of 4.8% of sales, compared to 4.2% in 2018
• Naturex integration project progressing well
• Givaudan Business Solutions well advanced and delivering planned benefits

Business performance

Givaudan Group sales for the first six months of the year were CHF 3,094 million, an increase of 6.3% on a like-for-like basis and 15.7% in Swiss francs.

Fragrance Division sales were CHF 1,361 million, an increase of 8.6% on a like-for-like basis and 11.3% in Swiss francs.

Flavour Division sales were CHF 1,733 million, an increase of 4.4% on a like-for-like basis and 19.4% in Swiss francs.

Givaudan continued the year with good business momentum and with the project pipeline and win rates being sustained at a high level. This excellent growth was achieved across all product segments and geographies, with our key strategic focus areas of Naturals, Health and well-being, Active Beauty, Integrated Solutions and local and regional customers delivering strong growth, complemented by the recent acquisitions.

The Company continues to implement price increases in collaboration with its customers to compensate for the increases in input costs.

Gross Profit

The gross profit increased by 7.8% from CHF 1,182 million in 2018 to CHF 1,274 million in 2019. Despite continued productivity gains and cost discipline, the gross margin declined to 41.2% in 2019 compared to 44.2% in 2018. This was mainly due to the impact of higher input costs, and the lower margin of Naturex.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)^²

The EBITDA increased by 9.9% to CHF 660 million from CHF 601 million for the same period in 2018, whilst the EBITDA margin was 21.3% in 2019 compared to 22.5% in 2018. On a comparable basis, the EBITDA margin was 22.3% in 2019 compared to 23.4% in 2018.

In 2019, the Group incurred costs of CHF 19 million in relation to the implementation of the Givaudan Business Solutions organization, compared with CHF 25 million in 2018.

Operating Income

The operating income was stable at CHF 491 million, compared to CHF 489 million in 2018. When measured in local currency terms, the operating income increased by 2.3%. The operating margin decreased to 15.9% in 2019 from 18.3% in 2018.

Financial Performance

Financing costs were CHF 36 million in the first half of 2019, versus CHF 23 million for the same period in 2018, largely related to the increase in net debt of the Group in connection with the Naturex acquisition. Other financial expense, net of income, was CHF 18 million in 2019 versus CHF 35 million in 2018. As a reminder, in 2018 the Group incurred increased foreign exchange losses in markets where currencies could not be hedged.

The interim period income tax expense as a percentage of income before taxes was 13% in 2019, compared with 14% for the same period in 2018.

Net Income

The net income for the first six months of 2019 was CHF 380 million compared to CHF 371 million in 2018, an increase of 2.3%, resulting in a net profit margin of 12.3% versus 13.9% in 2018. Basic earnings per share were CHF 41.24 versus CHF 40.26 for the same period in 2018.

Cash Flow

Givaudan delivered an operating cash flow of CHF 271 million for the first six months of 2019, compared to CHF 269 million in 2018.

Net Working capital was relatively stable at 27.3% of sales compared to 28.7% in 2018.

Total net investments in property, plant and equipment were CHF 77 million, compared to CHF 122 million in 2018, as the Group continues to invest in expanding its capabilities in high growth markets. In 2018 the Group completed an agreement to sell and leaseback the Zurich Innovation Centre (ZIC) for a total consideration of CHF 173 million, of which CHF 100 million was received in 2018 and CHF 60 million was received in the first six months of 2019, with the balance to be received in the second half of 2019.

Intangible asset additions were CHF 17 million in 2019, compared to CHF 21 million in 2018, as the Company continues to invest in its IT platform capabilities, including those to support the introduction of the Givaudan Business Solutions organization.

Total net investments in tangible and intangible assets were 3.0% of sales, compared to 5.3% in 2018. Excluding the impact of the ZIC transaction, total net investments in tangible and intangible assets would have been 4.6% of sales.

Operating cash flow after net investments was CHF 177 million versus CHF 126 million recorded in 2018, an increase of 40%. Free cash flow⁵ was CHF 148 million in the first half of 2019, versus CHF 113 million for the comparable period in 2018, an increase of 31%. As a percentage of sales, free cash flow in the first six months of 2019 was 4.8%, compared to 4.2% in 2018.

Financial Position

Givaudan’s financial position remained solid at the end of June 2019. Net debt at June 2019 was CHF 3,710 million, up from CHF 2,847 million at December 2018, with the increase driven by the adoption of IFRS 16⁴, as well as the payment of the annual dividend of CHF 552 million in the first quarter of 2019. The leverage ratio⁶ was 49% compared to 41% at the end of 2018.

Givaudan Business Solutions

The Company is now well advanced in the implementation of Givaudan Business Solutions (GBS), a global organizational unit providing best-in-class internal processes and services.

The progressive implementation of GBS is fully in line with the plan and the new organization continues to deliver the foreseen financial benefits.

In the first six months of 2019, the Group incurred costs of CHF 19 million in relation to the implementation of the Givaudan Business Solutions organization, compared with CHF 25 million in the same period in 2018.

Naturex

Givaudan completed the acquisition of Naturex in September 2018 and has consolidated the financial results of Naturex from 1 September 2018. Naturex is an international leader in plant extraction and the development of natural ingredients and solutions for the food, health and beauty sectors.

In the first six months of 2019, Naturex contributed CHF 235 million of sales, CHF 229 million in the Flavour Division and CHF 6 million in the Fragrance Division. The integration of Naturex into Givaudan is progressing as planned and the business of Naturex has returned to growth in the first six months of 2019, compared to the same period in 2018.

Givaudan aims to achieve sales growth of the Naturex portfolio of 10% per annum from 2021 and at the same time return the profitability and other key financial indicators of the combined business to pre-acquisition levels by 2021 for the Flavour Division.

2020 guidance: Responsible growth. Shared success.

The Company’s 2020 ambition is to create further value through profitable, responsible growth. Building on the first three years of this strategic cycle, Givaudan’s 2020 ambition is defined around the three strategic pillars of ‘Growing with our customers’, ‘Delivering with excellence’ and ‘Partnering for shared success’.

As part of the Company’s 2020 strategy, Givaudan also seeks to create value through targeted acquisitions, which complement existing capabilities in providing winning solutions for its customers. Since 2014, Givaudan has announced eleven acquisitions, which are fully in line with the growth pillars within the Company’s 2020 strategy.

Ambitious financial targets are a fundamental part of Givaudan’s strategy. We aim to outpace the market with 4-5% sales growth and a free cash flow of 12-17% of sales, both measured as an average over the five-year period of our strategy cycle. It is Givaudan’s intention to maintain its current dividend practice as part of this ambition.

Key Figures

Sales performance January to June

Sales evolution by market January to June

Fragrance Division

Fragrance Division sales were CHF 1,361 million, an increase of 8.6% on a like-for-like basis and an increase of 11.3% in Swiss francs over 2018. The sales of the Fragrance Division include CHF 6 million from Naturex, acquired in September 2018 and CHF 5 million from Albert Vieille, acquired in May 2019. Sales growth from Expressions Parfumées, acquired in 2018 was particularly strong in the first six months of the year.

Sales growth was driven both by price increases to recover the impact of higher input costs and strong growth of new wins.

Total sales for Fragrance Compounds (Fine Fragrances and Consumer Products combined) increased by 8.7% on a like-for-like basis. In Swiss francs, sales of compounds increased to CHF 1,131 million from CHF 1,057 million in 2018.

Fine Fragrance sales increased by 8.5% on a like-for-like basis against a strong comparable in 2018, with growth recorded in both mature and high growth markets.

Consumer Products sales increased by 8.7% on a like-for-like basis. The growth was delivered in both high growth and mature markets and was spread across all customer groups and regions.

Sales of Fragrance Ingredients and Active Beauty increased by 8.2% on a like-for-like basis with a double-digit growth in Active Beauty and good sales momentum in Fragrance Ingredients.

The EBITDA of the Fragrance Division increased to CHF 270 million in 2019 compared to CHF 250 million for the first six months of 2018. The increase is mainly driven by higher sales and the contribution of the recent acquisitions. The EBITDA margin decreased slightly to 19.8% in 2019 from 20.4% in 2018, largely due to the higher raw material costs. On a comparable basis the EBITDA margin of the Fragrance Division was 21.3% in 2019 compared to 22.4% in 2018.

In the first six months of 2019 the division incurred costs associated with the GBS project of CHF 19 million, compared to CHF 25 million in 2018.

The operating income increased by 5.0% to CHF 213 million in 2019, versus CHF 203 million for the same period in 2018. The operating margin decreased to 15.7% in 2019 from 16.6% in 2018.

Fine Fragrances

Fine Fragrance sales increased by 8.5% on a like-for-like basis against a strong 2018 comparable, with growth recorded in both mature and high growth markets. These gains were driven by a high level of new business wins across all customer groups and strong market performance of recent launches.

On a regional basis, growth was recorded in both mature and high growth markets. Sales performance in Western Europe was driven by strong inflow of new business while North America sustained a positive momentum with established volume growth at key customers. In the high growth markets, double-digit sales performance in Asia and the Middle East was partially offset by lower sales in Latin America which had a strong comparable from the prior year.

This growth was also supported by an excellent awards season in Latin America, the USA and Europe with many of our perfumers receiving recognition for their contribution to create products that consumers love.

Consumer Products

Consumer Products sales increased by 8.7% on a like-for-like basis. The growth was delivered in high growth and mature markets and was spread across all customer groups and all regions.

On a regional basis, Latin America reported double-digit growth with all customer groups and product segments contributing to the strong growth. Asia delivered mid single-digit growth versus a solid comparable period in 2018 driven by international customers across all sub-regions. The South Asia sub-region recorded double-digit growth despite a high comparable, and the South East Asia sub-region posted solid growth as well. In Europe, Africa and the Middle East, the sales increase was driven by good performance spread across all sub-regions, all customer groups, and all product segments, including double-digit growth in the African Middle East sub-region. North America grew double-digit, which was attributed to a high sales increase with international customers.

On a product segment basis, all segments contributed to the sales growth, notably double-digit growth of home care and solid performance in Fabric Care and Personal Care.

Fragrance Ingredients and Active Beauty

Sales of Fragrance Ingredients and Active Beauty increased by 8.2% on a like-for-like basis. Active Beauty delivered double-digit sales growth against a strong comparable driven by all customer types and by the strong growth of active ingredients. Fragrance Ingredients experienced good growth in the first six months of the year.