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Givaudan posts surprise profit drop as financial costs bite

Givaudan posts surprise profit drop as financial costs bite
An employee walks down the stairs at Givaudan's perfumery school in Singapore January 7, 2016. REUTERS/Edgar Su Copyright Edgar Su(Reuters)
Copyright Edgar Su(Reuters)
By Reuters
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ZURICH (Reuters) - Givaudan said its 2018 net income fell by nearly 8 percent as higher financing costs and foreign currency losses hit the fragrance and flavourings company.

The Swiss company reported net income of 663 million Swiss francs (£508.1 million), down from 720 million Swiss francs in 2017, badly missing the average estimate of 727 million francs in a Reuters poll of analysts.

Financing costs rose to 55 million francs from 42 million francs a year earlier, largely related to its purchase of French natural ingredients group Naturex for 1.3 billion euros. Its tax rate also rose.

Givaudan bought Naturex, which develops ingredients from plant extracts, to concentrate more on natural flavours to align with shifting consumer demand.

Geneva-based Givaudan, which makes fragrances for perfumes and washing powder and flavours for juice drinks and coffee, said other financial expenses almost doubled to 56 million francs, "mainly as a result of increased foreign currency losses in markets where currencies could not be hedged, most notably in Argentina."

On the top line, like-for-like sales rose 5.6 percent to 5.5 billion Swiss francs, better than the 5.1 percent increase expected in the Reuters poll.

The company confirmed on Friday its financial targets for annual sales growth of 4-5 percent and a free cash flow of 12 to 17 percent of sales. It proposed raising its dividend 3.4 percent to 60 francs.

(Reporting by John Revill; Editing by Michael Shields)

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