Well-fed pets

Symrise had a more than decent start to 2022, outgrowing the old F&F bellwether, Givaudan. Interestingly, the historic business did fairly well although the momentum came from the newer businesses, which reported double-digit organic sales growth. Unfortunately, the trading update did not include any profitability guidance, which would have been helpful although the management fully confirmed the FY guidance including the profitability target.

Margins will not fall off a cliff

Symrise reported a good set of figures with only a moderate dip (-90bp) in the gross profit margin for the full year. Looking more closely, one can see a 190bp drop yoy. On the other hand, the company reported high single-digit to low double-digit organic growth, which should imply a stronger than usual pricing momentum. Reported figures were ahead of our positive expectations (sales: +1.3%; EBITDA: +1.5%), whereas they gave a mixed picture to consensus (sales: +0.6%; EBITDA: -0.4%).

Who will become Mr Bertram’s successor?

‘Get out while the party is hot’ is a proverb, but it also applies to the current CEO, Mr Bertram. He will retire in 2022 after more than a decade of making Symrise a trendsetting strong player in the flavour & fragrance industry. It is still unclear who will become his successor. We believe, this is a crucial point. Symrise’s consensus-beating Q3 sales trading statement benefited from a positive FX contribution.

Strong performance continues

Symrise again reported strong figures as expected (basically no beat to consensus), which were a notch above our estimates. Interestingly, the company could compensate for the higher raw material prices and reported a higher EBITDA margin. This confirmed our strong view on Symrise. It seems that management has also become more confident as it has adjusted the profitability guidance moderately upwards.

The expected strong performance

Basically, it was not too difficult to expect a strong organic start, but Symrise was in a position to top this, beating consensus by +2.5pp. Our expectations had been higher than consensus, but not high enough. Unfortunately, management did not confirm the strong development by presenting a profitability figure in the trading update.

Cautious or without ambitions?

The FY 2020 figures did not provide any surprises after the release of some preliminary figures after the cyber attack at the end of 2020. Besides the higher profitability coming in at the lower end of the range as guided, operating CF touched the high watermark levels. Having listened to the investors call, the 2021 guidance looks well in reach as management guided for a slight head start and ruled out any margin erosion.

A close shave!

Unfortunately, cyber attacks have become part of our everyday business life as laptops, mobile devices and digitalisation have invaded our behaviour. Knowing this, a company needs to be prepared. This seems to be the case at Symrise, which looks to have reacted with a pre-defined protocol. As isolation and shutdown of compromised systems are usual procedures, production and logistics typically suffer the most. Nevertheless, the released preliminary figures fit into our strong view on the compan

Some deceleration in Q3

Symrise has done very well in the current environment but finally some clouds have appeared on the horizon and the management has had to ‘modify’ the very strong guidance. In our view, this is no biggie and reproducible. The reported figures were in-line with our expectations, but missed the consensus.

Q2 with stronger organic growth

It looks as if Symrise just took a small break in Q1 before coming back in the fast lane pushed by the strong demand in Latin America and Asia-Pacific. As the company has a wide range of offerings, so lower demand in e.g. Fine Fragrances could be compensated by Food and Pet Food. Interestingly, EBITDA moved closer to its target. Therefore our expectations were beaten, like consensus.

Deceleration of organic growth

Symrise had a weak (organic) start yoy into year facing headwinds from the COVID-19 pandemic. Nevertheless, management confirmed its FY guidance. Reported sales figures did not meet consensus.

Confirmation of our positive view...

... but there are some profitability ‘clouds’ on the horizon. Symrise reported good FY figures and the top-line beat our expectations. Looking at the real figures, the company also provides some kind of adjusted figures too, profitability was held back, when compared to our estimates and also for consensus. A positive point was the higher gross profit margin. The 2020 guidance looks strong, if not ambitious.

After a weak Q2, growth accelerated

Symrise’s trading update included a nice set of 9M top-line figures, which were slightly ahead our expectations, but met consensus. Asia-Pacific and Latin America became strong growth drivers.

Where has all the growth gone?

Symrise’s H1 figures looked quite good – at first sight! Furthermore, the company added a new metric (normalised EBIT/EBITDA) and used it for the guidance. In general, some segments had a high previous-year base, which to some extent explains the weaker growth. The new reporting pattern is not that helpful. The reported figures came in short of our forecasts and those of the consensus.

Continued growth

Symrise has also tread the path of becoming more untransparent to investors, but the company is a follower not the spearhead. Top-line figures confirmed Symrise’s growth story as Q1 sales were organically up by +8.2%. Sales were slightly above our expectations. Management’s guidance update appears rather mediocre as the profitability target has been removed.

Everything fine?

We believe Symrise is in good shape, but the business gave management some challenging tasks (e.g. raw material prices) in order to keep profitability up. Symrise’s FY figures matched our expectations (D/A lower than expected) and EBIT was held up by a non-operational refund of VAT. The (re-)financing is also a challenge as Symrise’s maturity profile is somewhat front-end loaded (€500m becomes due in 2019) and another €400m (of €800m for ADF/IDF) is looking for financing.

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