LIBERUM: Screen – Pan-Europe - Mountain or Molehill in H2
In a bid to leave full-year estimates unchanged, management will often cite a higher H2 weighting after a miss at the interims. Conversely, we often see prudence after a strong H1, with analysts reluctant to upgrade numbers.
GIVN AI ASML CAPC IMI INF SY1 TW/ WKL WPP
21 Nov 19
Continued good organic growth
Givaudan’s operating growth was additionally pushed by acquisitions, especially in Flavour. We assume there were some positive effects from higher sales prices for the established business, whereas new wins are expected to be calculated with higher input costs. Although it remains unclear whether higher sales prices really compensated for higher raw material prices, we expect a continuation of the positive H1 trend. The top-line came in slightly stronger than expected, whereas consensus was met.
10 Oct 19
Strong top-line growth, but negative margin development
Givaudan reported mixed H1 figures. The top-line was driven by sustainable organic growth in each division and was additionally pushed by acquisitions, especially in Flavour. The gross profit margin already shows the negative impact from higher raw material prices and a less favourable product mix. The H1 figures confirmed our cautious view on the company, whereas consensus’ profitability expectations were not met. The reasons for this development were not explained well.
18 Jul 19
Profitability issue in H2
Givaudan reported good top-line growth, but profitability suffered from the broad impact from higher raw material prices and the costs for Givaudan Business Solutions GBS), which still generated a loss on a net basis. However, the top-line beat our expectations, but profitability came in below. Consensus was barely met on the profitability level.
25 Jan 19
With some help ...
... from acquisitions. Givaudan reported equal contributions from the organic business and from acquisitions to the top line in Q3. The reported set of figures was slightly above our expectations and outpaced the consensus. Unfortunately, the report gave only some small hints on profitability.
09 Oct 18
LIBERUM: Mountain or Molehill in H2 – Pan-Europe
In a bid to leave full-year estimates unchanged, management will often cite a higher H2 weighting after a miss at the interims. Conversely, we often see prudence after a strong H1, with analysts reluctant to upgrade numbers. The ‘anchoring’ around the full-year estimates can lead to companies facing either mountains or molehills in H2. Last year, Rotork and Rightmove were identified prior to warning and beating, respectively, (PDF). In this screen we search for further possible ‘warners’ – both positive and negative – focussing on 2018E H2 EPS weightings vs. their five-year median. AB InBev and Spirent Communications face tougher H2s than usual but are rated Buy by Liberum. Conversely, IAG, Publicis and Travis Perkins look well-placed to exceed full-year expectations.
GIVN ABI AZN ASML SPT VIV CARLB DOM GSK IAG PAGE PSON PUB SCHP SHP TPK ULVR
02 Oct 18
The long arm of BASF
BASF’s outage of the citral plant at the end of October 2017 (declaration of Force Majeure) still impacts the value chain and burdens Fragrance’s profitability as these businesses have to buy stock for any(?) price in order to secure sourcing. The impact from which has been stronger than expected and profitability in H1 came in lower than expected. Consensus was broadly met.
19 Jul 18
LIBERUM: Givaudan - Solid 1Q sales but earnings visibility lower than usual
Givaudan 1Q sales growth was solid albeit a 50bp miss versus consensus. We are keeping our full year estimates largely unchanged. Herein we summarise today’s results including some takeaways from the results conference which as always was not broadcast.
10 Apr 18
LIBERUM: Flavour and Fragrance Ingredients - Cloudy skies for Givaudan and Symrise
We think 2018 will be a tricky year for Givaudan (GIVN) and Symrise (SY1) shares and downgrade GIVN to Hold from Buy and reiterate the Sell on SY1. Although market growth may be slightly stronger than in 2017, the disruption to aroma chemical inputs caused by the BASF fire increases forecasting risks for 2018, and with China capacity cuts may result in ongoing higher aroma input costs. Meanwhile, SY1 faces meaningful Dollar translation headwinds, whilst GIVN’s attractions as a bond proxy may be challenged by rising interest rates.
15 Mar 18
LIBERUM: Flavour and Fragrance Ingredients - BASF fire makes F&F sector unpredictable in 2018
This email focuses on the implications of the BASF fire in Germany in late October which has taken down ~70% of world Citral and Isoprenolbased products used by the Fragrance industry. IFF US has guided to a 7% EBIT impact this year ($40m) and although this is expected to be only 2% after mitigations, the latter is complicated and the process means cashflow/earnings will be heavily skewed to 2H. Mid to long term, we expect the costs to be passed onto customers, but there will be some lingering inflationary effects now China is being stricter on enforcing enviro regulations and dual sourcing may be back in vogue. Which F&F company is going to be impacted most over the full year is hard to access - Symrise and IFF have the benefit of some internal production, but Givaudan has the best track record of raising product prices and the biggest leverage in reparations with BASF.
21 Feb 18
Higher organic growth, but also higher COGS
Givaudan’s FY figures were pretty much in-line with our expectations, but profitability suffered from the higher share of the CHF170 costs for the Givaudan Business Solutions programme, which had been guided lower. Business looks in a good shape. Higher raw material costs might not be passed through the way they have to in order to protect margins.
28 Jan 18
LIBERUM: Givaudan - FY results - Impressive 4Q LFL but choppy year ahead
Givaudan FY17 results were pretty much in line or a small beat but the big feature is the stunning LFL revenue growth in 4Q of 9.4%. Some key factors behind this we understand was recovering LATAM food markets, very strong Christmas sales in Fine Fragrance and a broad based improvement across most geographies developed and developing. That said higher prices to recover accelerating input costs may have been a factor. As always there is no year ahead guidance though the conference call may help. We think GIVN will say cost inflation will be 6-7%, 2x 2017 levels and recoverable with a lag. We expect BASF to compensate for the materials disruptions in time. FX is a small headwind. Non recurrence of one-offs in Flavors will boost 2018 growth by 7%, 2/3 of analyst consensus for 2018 EBITDA growth.
26 Jan 18
LIBERUM: Chemical Snippets - F&F industry concerns, FX niggles for UK Chems, AL buy
Givaudan and Symrise face potential triple whammy in 2018 - FX translation headwinds, rising aroma chemical costs, no-let up in customer cost-down | JMAT and Victrex FX niggles | Air Liquide buy note
GIVN SY1 VCT JMAT AI
24 Jan 18
Revival of organic growth
Givaudan’s sales 9M sales figures were up +7% to CHF3,757m, driven by organic growth (+4%) and acquisitions (+4%). Mature markets rose +11% to CHF2,143m and high growth markets by +2% to CHF1,614m. Management confirmed mid-term guidance for the 2015-20 period, expecting a 4-5% average organic growth rate and an average 12-17% free cash flow as a percentage of sales. A more explicit guidance for 2017 was again not given.
10 Oct 17
Givaudan reported +6% (organic: +2%) higher sales (to CHF2,483m) but the gross profit margin declined 80bp to 45.6% in H1 due to the newly-acquired businesses. EBITDA was down 6% to CHF597m as, in the previous year’s period, the company booked a CHF55m gain from changes in plan assets. Net income attributable to shareholders came in at CHF384m (CHF368m). Operating CF (CHF269m after CHF237m) primarily improved due to lower NWC outflow (CHF-210m after CHF-242m) despite higher inventories. Investing CF (CHF-229m after CHF-48m) was driven by significant higher capex and acquisition-related costs (Activ International) of CHF-111m. Financing CF moved from CHF-407m to CHF-146m due to higher net cross debt proceeds (CHF385m after CHF88m), which was more than eaten up by the higher dividend payment of CHF-515m (CHF-495m). Management confirmed its mid-term guidance for the 2015-20 period, expecting a 4-5% average organic growth rate and an average 12-17% free cash flow as a percentage of sales. An explicit guidance for 2017 was again not given.
21 Jul 17
H2’s weaker profitability
Givaudan reported +6% higher FY sales (organic: +4%) to CHF4,663m, but the gross profit margin weakened from 46.2% to 45.6%. EBITDA came in +5% higher at €1,126m and the margin was 24.1% (24.3%). Net income attributable to shareholders increased +3% to CHF64m. Operating CF declined 12% to CHF805m, primarily due to lower adjustments for non-cash items (CHF261m after CHF390m). Investing CF moved from CHF-225m to CHF-503m primarily pushed by acquisitions (Spicetec Flavors and Seasonings). Financing CF was CHF-437m (CHF-578m) benefiting from higher net cross debt issuance despite higher dividend payments. Management proposes, as expected, a CHF2 higher dividend (CHF56 after CHF54) per share at the next AGM on 23 March 2017. Management confirmed the next mid-term guidance for the 2015-20 period of a 4-5% average organic growth rate and an average 12-17% free cash flow as a percentage of sales. A more explicit guidance for 2017 was not given.
01 Feb 17
Mature markets flare-up
Reported figures were positively impacted by favourable FX rates as the performance in developed markets was operationally good, but not strong. Group sales rose +7% (+5% lfl) to CHF3,518m after nine months. Fragrance reported the strongest performance (+9% to CHF1,699m; +8% lfl) followed by Flavour (+5% to CHF1,819m; +3% lfl), which was partly helped by an acquisition.
10 Oct 16
Real performance held back, but managed to improve profitability
FY group sales were relatively unchanged (organic: +3%) at CHF4,396m but gross profit margin was a notch stronger (+20bp to 46.2%). EBIT was up +4% to CHF794m and net profit attributable to shareholders rose +13% to CHF635m helped by a lower tax burden due to lower deferred taxes. Operating CF increased +14% to CHF915m supported by a lower NWC outflow (CHF-80m after CHF-1126m). NWC saw lower inventories and other current assets. Despite lower capex, investing CF increased from CHF-209m to CHF-225m, factoring in higher acquisition costs. Having paid higher dividends, financing CF came in at CHF-578m after CHF-697m, helped by lower net gross debt repayments (CHF-60m after CHF-168m). Management will propose a CHF4 higher dividend (CHF54 after CHF50) per share at the next AGM on 17 March 2016. Management confirmed the next mid-term guidance for the 2015-2020 period, expecting a 4-5% average organic growth rate and an average 12-17% free cash flow as % of sales. An explicit 2016 was not given.
02 Feb 16
Managing CHF effects – operating CF clearly up
The H1 figures show good managerial skills in dealing with the negative effects from the de-linking of the reporting currency. Group sales came in fairly unchanged at CHF2,184m and the gross profit margin suffered only slightly (46.5% after 46.6%) despite lower operational costs. EBITDA was a touch up (CHF566m after CHF562m) and EBIT improved +11% to CHF339m. Operating CF jumped +56% to CHF341m fuelled by a swing in other non-cash items and clearly lower NWC outflow (CHF-178m after CHF-247m). Investing CF moved from CHF-40m to CHF-77m due to the lack of net divestment proceeds and some higher acquisition costs. Financing CF was a bit up, mainly driven by the higher dividend payment (CHF-461m after CHF-433m). Management failed to give clear 2015 guidance, but re-iterated its mid-term guidance.
17 Jul 15