Givaudan targets smaller customers to offset consumer goods slowdown

Givaudan, the world's biggest flavours and fragrance maker, said on Friday it is aiming to offset a demand slowdown from big consumer goods companies by looking for smaller, regional customers.

The Swiss company's first-half net profit rose more than 11 percent, beating analysts' forecasts. Cost-cutting, including moving production from a Swiss site to Mako, Hungary, helped to support the profit increase.

But sales at its fragrance division, which is heavily exposed to demand for luxury goods, fell 1.1 percent.

Givaudan Chief Executive Gilles Andrier told Reuters that the company, which provided the formula for Prada brand Miu Miu's recently released perfume, is increasingly seeking smaller and regional customers to reduce its reliance on the world's largest food makers and fragrance manufacturers for business.

"Going-forward, it's really about continuing to compensate with local and regional clients the slowdown with large clients," Andrier said.

The Geneva-based company, which competes with Germany's Symrise, Firmenich and IFF, produced healthy sales growth at its flavours business, but these gains were eroded by the strong Swiss franc. Overall, the division's sales rose 0.4 percent in the six months. Last year, flavours made up 52 percent of group sales and fragrances 48 percent, according to the company's website.

Givaudan's shares rose more than four percent to their highest in two months and were among the top gainers in the pan-European FTSEurofirst 300 index.
The stock was 4.5 percent higher at 1,758 Swiss francs by 1149 GMT.

"These are robust results from Givaudan, considering the ongoing challenging market environment," Bank Vontobel analyst Jean-Philippe Bertschy said. He rates the stock at "hold."

The company and its peers have benefited from strong emerging market demand for their products, where consumers have had more money to spend on ready-meals and cosmetics. But growth in these markets has slowed down.

Givaudan stuck to its mid-term goal to grow revenue, excluding acquisitions and divestments, between 4.5 and 5.5 percent a year, assuming overall market growth of 2 to 3 percent. It also confirmed a commitment to return more than 60 percent of free cash flow to shareholders.

Net profit for the first six months stood at 339 million Swiss francs ($354.34 million) from 305 million francs year-ago.

The net result beat analyst expectations, which averaged 302 million francs.