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Dr. Heinz Jürgen-Bertram, CEO of Symrise AG

“In the second quarter the coronavirus pandemic began to significantly impact the global economy and above all many people’s everyday lives. Even in this historically exceptional situation, Symrise has done an excellent job of staying on course. Thanks to our global presence, diversified portfolio and broad customer base, our feet rest very firmly on the ground. We remained fully operational in the second quarter and were able to supply our customers in the usual reliable manner,” said Heinz Jürgen-Bertram, CEO of Symrise AG.

“Of course, it is hard to predict the course of the coronavirus pandemic. However, after our performance in the first half of the year, we are looking ahead to the second half with confidence. For the full fiscal year 2020 we again want to grow faster than the market and expect that we will achieve increased profitability overall. We are therefore raising our guidance for the EBITDA margin to a range of 21 to 22 %.”

With coronavirus pandemic ongoing, continued growth in all segments

The Symrise Group achieved sales growth of 7.6 % in the first half of 2020 to € 1,821 million (H1 2019: € 1,692 million). The acquisition of ADF/IDF had a positive impact of € 106 million on sales performance. In organic terms, sales increased by 3.4 %. Amid the coronavirus pandemic, changes in consumer behavior were seen for the first time in the Scent & Care and Flavor segments in the second quarter. This resulted in both positive and negative effects on demand in individual business units. With its broad range of product solutions for foods, personal care and hygiene, Symrise serves the needs of everyday life, especially in these difficult times.

Achim Daub, Global President Scent & Care Member of the Executive Board Symrise AG

The Scent & Care segment

Scent & Care achieved solid organic growth of 2.6 % in the first half of 2020. Taking currency translation effects into account, sales in the first six months in the reporting currency amounted to € 711 million and were therefore almost unchanged as compared to the same period of the previous year (H1 2019: € 712 million).

Strong demand in the Fragrance division drove sales in the Consumer Fragrances and Oral Care business units, which recorded high organic growth in the single and double-digit range respectively. The Fine Fragrances business unit, at the same time noticed the effects of the coronavirus pandemic clearly. The worldwide reduction in travel activity and closed stores due to lockdowns had a negative impact on the demand for luxury items. Overall, the Fragrance division achieved solid organic growth in the single-digit percentage range with increases in all regions.

Sales in the Aroma Molecules division in the first six months of 2020 ranged slightly below the high level of the previous year, mainly due to weaker demand for fragrances. On the other hand, positive momentum came from the Menthols business unit, which achieved organic growth in the double-digit percentage range. The EAME, North and Latin America regions achieved the strongest gains.

Sales in the Cosmetic Ingredients division were affected by weaker demand for sun protection products, attributable mainly to the reduction in travel due to the coronavirus pandemic. The other business units showed good organic growth in the single and double-digit percentage range. Key growth markets were Brazil, China and Korea in the Latin America and Asia/Pacific regions.

The Scent & Care segment improved EBITDA to € 146 million (H1 2019: € 140 million). The EBITDA margin for the period under review increased to 20.6 % (H1 2019: 19.7 %).

The Flavor segment

Flavor achieved organic growth of 0.6 % in the period under review. Taking currency translation effects into account, segment sales in the reporting currency amounted to € 636 million (H1 2019: € 637 million). Against the backdrop of the coronavirus pandemic, the trend toward cooking and eating at home led to a strong demand for products from the Savory business unit and product solutions for baked goods and cereals. At the same time, reduced out-of-home eating and drinking led to a lower demand for beverage products and sweets.

In the EAME region, the Flavor segment suffered from significantly reduced demand for beverage products and sweets, while the Savory business unit recorded a high single-digit growth rate. Germany and the Gulf region achieved the strongest gains. Overall, sales in the EAME region remained slightly below the figure for the first half of 2019.

Organic sales in North America were roughly on par with the same period of the previous year. While Savory product solutions enjoyed great demand, beverage products and sweets sold less.

The Asia/Pacific region reported organic growth in the single-digit percentage range, driven primarily by very strong demand for products from the Savory business unit, which showed organic growth in the double-digit percentage range. The largest increases came from the national markets of Indonesia, Thailand, Vietnam and Singapore.

The Latin America region achieved the strongest growth in the segment in the first half of 2020 and was largely unaffected by the coronavirus pandemic. All business units realized high organic growth in the single or double-digit percentage range. Strong gains were posted especially in the national markets of Brazil, Uruguay and Mexico.

The EBITDA of the Flavor segment was up 2.2 % to € 147 million (H1 2019: € 144 million). The EBITDA margin improved from 22.6 % in the first half of 2019 to a very strong 23.2 %, mainly due to tight control on costs and proportionally lower raw materials costs.

The Nutrition segment

Nutrition achieved strong organic growth of 10.5 %. Accounting for portfolio and currency translation effects, sales in the reporting currency amounted to € 474 million and were 38.1 % above the previous year’s level (H1 2019: € 343 million). ADF/IDF contributed sales of € 106 million.

The Pet Food business unit proved to be the growth driver of the segment, achieving high organic growth in the double-digit percentage range in all regions. Sales developed particularly dynamically in the USA, Mexico, Brazil and Russia.

In the Food business unit, the Asia/Pacific region stood out with double-digit growth, especially in China, India and Taiwan. In the EAME region, sales matched the previous year’s level, while North and Latin America dropped slightly below the last year.

Strong impetus came from the Aqua business unit, which achieved good growth especially in the EAME and Asia/Pacific regions.

Probi reported growth in the single-digit percentage range during the reporting period, primarily driven by the North America and Asia/Pacific regions.

The Nutrition segment generated an EBITDA of € 100 million in the reporting period (H1 2019 EBITDA(N): € 67 million). The EBITDA margin in the segment increased by 1.5 percentage points to 21.0 % (EBITDA(N) margin H1 2019: 19.5 %). The improved profitability is mainly due to the good performance of Pet Food and the inclusion of ADF/IDF.

Operating result

Also within the challenging environment dominated by the coronavirus pandemic, Symrise was highly profitable in the first half of 2020. The Group recorded EBITDA of € 393 million. This represents an increase of 11.9 % over the same period a year earlier. This trend relates primarily to profitable sales growth and the inclusion of ADF/IDF. The EBITDA margin improved by 0.8 percentage points to 21.6 % (EBITDA(N) H1 2019: 20.8 %).

Net income for the period and earnings per share

Net income for the reporting period amounted to € 169 million, which was € 16 million above the normalized figure from the previous year of € 153 million. Basic earnings per share increased 10 % to € 1.25 after € 1.14 (normalized) in the first half of the previous year.

Cash flow from operating activities

The cash flow from operating activities for the first half of 2020 of € 219 million was € 78 million higher than the previous year’s level of € 141 million. The increase is mainly due to the improved operating result and the inclusion of ADF/IDF.

Financial position

Net debt increased by € 28 million to € 1,645 million compared to the reporting date of 31 December 2019. The ratio of net debt including lease liabilities to EBITDA(N) thus amounted to 2.2. Including pension obligations and lease liabilities, net debt equaled € 2,261 million, which corresponds to a ratio of net debt to EBITDA(N) of 3.0.

Symrise remains confident about the current fiscal year and raises EBITDA margin target

With its global presence, a steadily growing and diversified portfolio and broad customer base, Symrise considers itself to be robust and securely positioned even in the current challenging market environment. The Group is fully operational worldwide and is able to supply customers sustainably.

Even though the effects of the pandemic can only be estimated to a limited extent, the Group remains confident that it will again grow faster than the relevant market over the remainder of the year. The market growth is estimated to be around 3 to 4 %. Symrise considers itself to be well positioned to achieve the sales targets confirmed at the beginning of 2020.

Based on the strong business performance and profitability trend in the first half of the year, the Group is raising its original target of over 20 % for the EBITDA margin. For the 2020 fiscal year, Symrise now expects an EBITDA margin in the range of 21 to 22 %.

The mediumterm targets also remain in effect. The company aims to increase its annual sales to € 5.5 to € 6.0 billion by the end of the 2025 fiscal year. Symrise wants to achieve this with an annual organic growth of 5 to 7 % (CAGR) as well as additional targeted acquisitions. In the medium term, profitability should remain within a target corridor of 20 to 23 %.

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“Symrise AG again posted strong growth in 2019. With the acquisition of ADF/IDF, we have continued to expand in fast growing, high-margin business areas. We have also further diversified our product portfolio in the attractive pet food market and expanded our position in North America. In addition, we made investments to expand our capacities over the course of the year and rolled out new technologies around the world. These targeted growth initiatives, combined with our disciplined cost management, are clearly reflected in our operational development in recent quarters,” said Dr Heinz-Jürgen Bertram, CEO of Symrise AG. “Along with our customers, the capital market has also responded favorably to our performance. The share price has increased by 42 % in 2019. We want our shareholders to participate in our success again this year. At the Annual General Meeting of Symrise AG, the Executive Board and Supervisory Board will propose a dividend increase to € 0.95 per share.”

Industry-leading sales growth

In the year under review, Symrise benefited from good capacity utilization and strong demand in all segments and regions. Taking portfolio and exchange rate effects into account, Group sales increased by 8.0 % in the reporting period to € 3,407.9 million (2018: € 3,154.0 million). The organic growth rate achieved a clear plus of 5.7 %. As a result, the Group exceeded the average market growth rate in 2019, which was in the 3 to 4 % range according to estimates. The acquisition of the ADF/IDF Group, a leading US supplier of poultry and egg-based protein specialties, completed in November 2019, contributed approximately € 32 million to Group sales.

High profitability despite investments and fluctuating raw material costs

Despite higher expenses, Symrise increased its earnings before interest, taxes, depreciation and amortization as well as normalized for one-time effects resulting from the acquisition of ADF/IDF (EBITDA(N)) by a clear two-digit result of 12.2 % to € 707.2 million (2018: € 630.5 million). The deal resulted in one-time acquisition and integration expenses of € 16.3 million in 2019. The markets for raw materials remained tense, especially in the first half of the year. Notwithstanding the above, Symrise continued to invest in global capacity expansion. Major investment projects included the new manufacturing site in Nantong (China), the expansion of production capacity for menthol and natural extracts in the USA, and for pet food in Colombia and France.

Symrise achieved very strong profitability in the fiscal year 2019 and significantly exceeded the previous year’s level, with an EBITDA(N) margin of 20.8 %. As a result, Symrise was once again one of the most profitable companies in the industry.

Normalized net income increased by 10.2 % year-on-year to € 303.5 million (2018: € 275.3 million). This led to an increase in normalized earnings per share to € 2.25 (2018: € 2.12). Against the backdrop of the positive growth in earnings, the Executive Board and Supervisory Board of Symrise AG will propose a dividend of € 0.95 per share at the Annual General Meeting on 6 May 2020 (2018: € 0.90).

Strong cash flow trend

Symrise grew its normalized Business Free Cash flow  by 53 % to € 476 million in the year under review (2018: € 312 million). This represents 14.1 % of sales, as compared to 9.9 % in the previous fiscal year. This significant increase can be attributed above all to the strong gain in net income for the period and a below-average rise in working capital.

As at the reporting date, net debt, including pension provisions and similar obligations, had increased to € 2,221.5 million (2018: € 1,893.1 million). On 31 December 2019, the ratio of net debt – including pension provisions and similar obligations – to EBITDA stood at 3.1, and thus showed little change as compared to the previous year’s level (31 December 2018: 3.0). The medium-term target corridor for the ratio is 2.0 to 2.5.

The equity ratio increased from 39.5 % to 41.4 % at year-end. Symrise is thus in a very good financial position.

Segment Scent & Care

In the Scent & Care segment, sales in reporting currency grew by a positive 7.2 % to € 1,419.1 million (2018: € 1,324.1 million). This represents an increase of 5.6 % in organic terms. Dynamic growth was seen particularly in the Fragrances division, which experienced strong demand for fine fragrance products. This was reflected in double digit percentage growth in fine fragrances applications, supported by strong demand above all in EAME and Latin America. The Cosmetic Ingredients and Aroma Molecules divisions also posted gains.

Scent & Care grew its EBITDA by 9.3 % to € 278.0 million (2018: € 254.4 million). The EBITDA margin for the year under review was 19.6 % (2018: 19.2 %).

Segment Flavor

Flavor achieved a 5.6 % increase in sales to € 1,257.3 million in reporting currency (2018: € 1,191.1 million). After adjusting for exchange rate effects, the organic growth amounted to 3.8 %. This positive trend was carried by all regions and application areas. Flavor benefited in particular from dynamic demand in Asia/Pacific, where the segment achieved organic growth in the high single-digit percentage range. This was driven by flavorings for applications for sweet and beverage products, above all in Indonesia, Malaysia and China.

EBITDA in this segment increased significantly by 10.1 % in the reporting period to € 268.5 million (2018: € 243.9 million). As a result, the EBITDA margin was an outstanding 21.4 % (2018: 20.5 %).

Segment Nutrition

The Nutrition segment achieved in 2019 a 14.5 % increase in sales to € 731.5 million after sales of € 638.8 million in 2018. This included a total of € 32 million in sales from the ADF/IDF Group. Through the initial consolidation of the Group in November 2019, the fourth quarter showed a remarkably strong sales increase of 28.7 %. The segment also achieved significant organic growth. Once again, this growth was driven by product solutions in Pet Food. The strongest impetus came from North America and Latin America, where growth was in the double-digit percentage range.

Normalized for one-time acquisition and transaction costs, the segment achieved EBITDA of € 160.7 million for the reporting period (2018: € 132.3 million). This represents an increase of 21.5 %. The EBITDA(N) margin also showed healthy growth. It increased to an excellent 22.0 %, as compared to 20.7 % in 2018.

Symrise looks ahead to 2020 with confidence

In 2020, the Company aims to yet again achieve significantly stronger growth than the relevant market for fragrances and flavors as well as cosmetic ingredients, which is projected to grow at a rate of around 4 %. The Company expects all of its segments to grow notably faster than the global market. Assuming raw material costs at their current levels and a stable EUR/USD exchange rate, Symrise currently anticipates an EBITDA margin of over 20 % in all segments for the current fiscal year.

Overall, with its global presence, diversified portfolio and proven strategy, Symrise believes it is well positioned to achieve these growth ambitions. The Company plans to continue expanding in fast growing, high-margin business areas in the future, combining organic investments with targeted acquisitions. In addition, Symrise will remain committed to its disciplined cost and efficiency management.

Symrise believes that it is very well positioned to achieve the targets updated at the beginning of 2019. By 2025, the Company plans to increase its sales from € 5.5 billion to € 6.0 billion by means of organic growth at an annual rate of 5 to 7 % (CAGR), combined with targeted complementary acquisitions. Long-term, Symrise aims to achieve an EBITDA margin within the target corridor of 20 to 23 %.

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