Givaudan to accelerate price increases as input costs hit margins

By Silke Koltrowitz

ZURICH (Reuters) -Swiss fragrance and flavour maker Givaudan will accelerate price increases in the second half of the year to offset higher costs, it said on Thursday after reporting improving sales growth despite squeezed margins.

In addition to price increases, Givaudan’s half-year results benefited from rising perfume sales as airport travel recovers and a pick-up in the food segment as more people eat out.

Like-for-like sales rose 7.9% year on year in the second quarter, compared with 4.6% growth in the first quarter, the company said.

Givaudan and its peers are having to contend with higher input costs, supply chain disruption and delays in implementing price increases.

“For the inbound supply chain, we see a doubling of lead times from Asia,” finance chief Tom Hallam told Reuters.

“Price increases are expected to accelerate in the second half,” he added, confirming input costs are expected to increase by about 9% this year.

First-half net profit fell to 440 million Swiss francs ($453.5 million), with the operating margin falling to 17.3% from 18.2% a year earlier, Givaudan said.

Shares in the company, which have slumped by 30% this year, were down 2% at 0713 GMT.

“The performance should be put into the context of ongoing tight supply chain and significant headwinds in China,” said Vontobel analyst Jean-Philippe Bertschy.

Hallam said Givaudan had no intention of changing its strategy because of recent consolidation in the industry, but would keep focusing on its growth categories.

He said the company would keep strengthening its business in active beauty, health and nutrition and with local and regional customers through bolt-on acquisitions.

Givaudan reiterated its mid-term targets of 4-5% annual organic sales growth on average until 2025.

($1 = 0.9702 Swiss francs)

($1 = 0.9779 euros)

(Reporting by Silke KoltrowitzEditing by Miranda Murray and David Goodman)