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Emerging Market Sales Help Buoy Symrise's First Half 2011 Financials

Posted: August 10, 2011

Reporting on its first half 2011 financials, Symrise AG (Holzminden, Germany) noted that the company increased its sales by about 3% at local currency and achieved and EBITDA margin of 20%, despite the strong comparables from the previous year. The major drivers for this increase were business in emerging markets, as well as business from major customers. However, Symrise also saw increased difficulty in the second quarter with the continued rise of raw material prices and negative currency fluctuations.

Symrise CEO Heinz-Jürgen Bertram said, “Following the enormous catch-up effect during the previous year and a good first quarter, market growth slowed in the recent months. Whereas the flavor business continued to grow, the demand for fragrances declined. Nonetheless, Symrise continued to grow throughout the first half of the year. We achieved the targeted EBITDA margin of 20%. We consider this to be a respectable achievement in view of the continually high raw material prices and unfavorable exchange rate effects. Our statement from the first quarter that consumer spending is being affected by uncertainties on global markets still holds true. Despite the somewhat subdued outlook we are striving to achieve sales growth of around 3% and an EBITDA margin of 20% for the full year 2011. The fundamental drivers of our business will remain intact in the mid-term. We are therefore continuing to pursue our strategy of focusing on innovation, emerging markets and major customers.”

In the first six months of the current financial year, Symrise posted a revenue increase of approximately 2 % to €811.8 million (previous year was €797.5 million). The sales increase was 2.6% at local currency, with the Asia/Pacific region exhibiting the strongest growth, followed by Latin America and EAME. The company also noted that while emerging markets did not contribute as extraordinarily high as the previous year, they did continue rising above average. Sales generated in emerging markets as a whole rose 4% and accounted for 46% of the company’s sales.

The Asia/Pacific region reported a 5% sales increase, as both divisions benefited from continuous high demand. Latin America grew at a more moderate rate than the previous year, but the region still achieved a 4% sales increase. Sales in EAME rose 3%, with Western Europe making a strong contribution, but North American sales declined 7% over the previous year, primarily due to the slower economy and significant currency effects. At local currency, revenues declined by 2%.

The company’s focus on business with internationally active food and consumer goods companies in the first half of the year paid off again. It saw its Flavor & Nutrition realize top 10 customer sales growth of 6.5% and Scent & Care 3.4%. Also, in the first six months of 2011, Symrise generated about 30% of sales from business with its major customers.

Specifically in its Scent & Care division, Symrise generated sales of €409.5 million in the first half of the year, down from the previous year’s €411.9 million. The division’s sales remained largely stable, and at local currency sales slightly rose by 0.3%. The application segments life essentials and aroma molecules continued positive development, especially in the area of fragrance ingredients, and the menthol business of enjoyed double-digit growth.

Latin America remained the fastest-growing region for Scent & Care with a sales increase of 5% at local currency. In Asia/Pacific and North America sales rose 1% at local currency. Sales in the EAME region declined 2% at local currency over the incredibly strong previous year. The division reported an EBITDA of € 76.9 million (2010: € 85.5 million) for the first half of the year. The EBITDA margin was 18.8%.

Symrise’s Flavor & Nutrition continued its growth path in the first half of 2011 with a 4% sales increase to €402.3 million, up from the previous year’s €385.6 million. This corresponds to 5% at local currency. Flavor & Nutrition posted a sales increase of 8% (at local currency) in the EAME region, benefiting from high demand in all national markets. Beverage applications in particular developed positively as did the new application segment consumer health. Asia/Pacific was the second strongest region with sales growing by 7% at local currency. In Latin America, Flavor & Nutrition increased sales by 3% at local currency despite the strong previous year figures. In North America the slow economic environment and customer procurement delays led to a sales decline of 6% at local currency. The EBITDA amounted to €85.6 million (previous year: €92.2 million). The profitability of the division remained at a high level with an EBITDA margin of 21.3%.