Givaudan organic sales rise on higher prices, but currency effects weigh

By Jagoda Darlak and Matteo Allievi

(Reuters) -Swiss fragrance and flavour maker Givaudan beat third-quarter organic sales expectations on Thursday, aided by price increases and strong performance in its fragrance business.

The group has been suffering from weaker volumes driven by inventory reductions and lower demand especially in North America, but analysts said this trend had started to normalise.

Organic sales, which exclude effects from currency exchange and recent acquisitions, rose 4% to 1.88 billion Swiss francs ($2.1 billion) in the quarter, beating analysts’ estimate for 2.5% growth.

“Destocking is definitely coming to an end,” Vontobel analyst Jean-Philippe Bertschy said in a note, but added it was hard to assess demand in the coming quarters due to inflation that still weighs on consumers’ spending habits.

“We have a recovery, but it’s still fragile,” Bertschy said.

Givaudan’s shares were up 0.4% after rising 2% in early trading, softened by negative currency exchange effects that weighed on reported sales, which fell 4.3%.

The organic sales beat was likely driven by higher than expected pricing in foreign currencies, though this was offset by exchange rates when converted into Swiss francs, Jefferies said in a research note.

Givaudan, which recorded a 148-million franc hit from currency exchange in the quarter, said it would keep passing on higher input costs to customers through price hikes.

Bertschy said the results should reassure investors about the sector’s ability to return to positive volume growth after troubles in North America, which was the only region to report a decline in organic sales in the January-September period.

Givaudan did not provide quarterly sales by geography.

Its taste and wellbeing unit, which sells food and beverage extracts and makes up 54% of its revenue, posted a 1.7% increase in like-for-like sales in the quarter. The fragrance business, its second biggest unit, saw an increase of 6.5% on the same basis.

($1 = 0.9006 Swiss francs)