HOLZMINDEN, Germany—Symrise AG could not escape the consequences of the global economic downturn in the first quarter (Q1) of 2009. Although sales at local currency remained stable, the Group’s earnings position was affected by persistently high raw material prices, weaker sales development and integration and restructuring costs. Compared to the very strong first quarter of 2008, Symrise increased its consolidated sales by 2.6 percent from € 338.0 million to € 346.7 million (-0.3 percent at local currency). In the important North American market, the Group achieved growth of 48 percent (33 percent at local currency), with last year’s strategic acquisitions making an important contribution. Even excluding acquisitions, sales in North America developed very positively with organic growth of approximately 5 percent.
In the South American market also, Symrise posted pleasing sales growth of 14 percent (22 percent at local currency). In the Asia-Pacific region, sales remained virtually on a par with the previous year’s (+4 percent at actual rates, -3 percent at local currency). The effects of the negative economic environment were felt most keenly in EAME—which accounts for the largest proportion of sales – where sales fell by 12 percent (-11 percent at local currency).
Profitability affected by persistently high raw material prices
As stated, limited sales developments combined with persistently high raw material prices impacted the Q1 earnings position. Nonetheless, Symrise succeeded in implementing further price increases in the first three months of the year and thereby partly compensated for these negative factors.
At € 58.7 million, earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter of 2009 fell short of the previous year’s figure (€ 71.5 million). This corresponds to an EBITDA margin of 16.9 percent (previous year: 21.2 percent). Earnings suffered due to higher raw material costs, weaker sales development and integration and restructuring costs. Adjusted for integration and restructuring costs, the EBITDA margin came to 18.1 percent in the reporting period. After adjustments for non-operating items, the adjusted net income totaled € 28.4 million, compared to € 35.8 million in the first quarter of the previous year. The adjusted earnings per share dropped accordingly from € 0.30 to € 0.24.
Dr. Gerold Linzbach, chief executive officer of Symrise, explained: “The market environment still poses a huge challenge for the whole industry. Customers are continuing to reduce their inventory levels and their ordering behavior remains volatile. Symrise has succeeded in holding its own in this environment, although we are not satisfied with the earnings position. We have been working on restructuring plans for some time now and have implemented the first phase during Q1—primarily in Western Europe. We aim to consistently adjust our cost base to the current underlying conditions.”
Linzbach continued: “Symrise is still pursuing its goal of growing faster than the market. We believe that our strategy puts us in a good position to achieve this goal, even in the difficult environment of 2009.”
Growth driven by key accounts, innovations and emerging markets
The course of business in Q1 confirmed Symrise’s strategy of focusing on key accounts, innovations and emerging markets as growth drivers. Both of the two divisions succeeded in further boosting sales to their ten largest customers in the first quarter. The “AND” products – those which offer significant additional benefits to consumers – contributed towards growth at Scent & Care. At the beginning of the year, Kaden Biochemicals’ business activities (acquired in 2006) were transferred from Scent & Care to the Flavor & Nutrition division so as to enable the Group to optimally serve the growing nutritional supplements market in future. The Scent & Care division demonstrated its innovativeness in Q1 2009 by launching two successful new products in the Life Essentials division.
The markets in South America, Africa and the Middle East were the growth drivers in the emerging markets; Symrise achieved high double-digit growth rates in these markets.
Scent & Care – stable business development in difficult times
Despite the global economic crisis, the Scent & Care division recorded higher year-on-year sales in three of its four regions (North America, South America and Asia-Pacific). The effects of the global crisis and the associated reduction in inventory levels were felt most keenly in the EAME region, where Symrise experienced a drop in sales. At a global level, the Life Essentials division was the main sales driver with a 10-percent increase in sales (4 percent at local currency). Demand in the luxury segments Fine Fragrances and Personal Care, by contrast, fell further. Overall, Q1 sales based on actual rates amounted to € 179.8 million and therefore corresponded with the previous year’s Q1 figure. However, taking into account the effects of the acquisitions made in 2008, sales fell by 2 percent (-5 percent at local currency).
Flavor & Nutrition—growth in a weak market environment
In Q1 2009, Flavor & Nutrition generated sales of € 166.9 million. This corresponds to growth of 5.5 percents (3.1 percents at local currency). Business developments in this division were also affected by clients reducing their inventory levels. In the EAME region, sales were accordingly weak. By contrast, the Group recorded high growth rates in South America. In North America, sales were up 45 percent at local currency on the year, as a result of the contribution from the Chr. Hansen Flavors business.
Sound long-term financing basis
In Q1 2009, Symrise profited from its consistent working capital management and increased its operating free cash flow considerably from € 9.4 million to € 27.3 million. Net debt totaled € 629.3 million as of March 31, 2009. As a result of the acquisitions made in 2008, it was therefore € 92 million above the figure for Q1 of the previous year. However, compared to year-end 2008, the Group reduced its net debt by € 12 million. With a slightly improved equity ratio of 34.8 percent, the Group maintains a stable capital base.
The successful placement of a € 75 million promissory loan note announced today further consolidates Symrise’s sound long-term financing. By using this form of financing for the first time, Symrise is optimizing its debt maturity profile. The placement met with high demand from institutional investors.