Company Reports

Wide-moat Symrise reported organic sales growth of 10.9% for the first quarter of 2024 with strong volume growth of 11.9%, driven primarily by heightened demand in the scent and care segment where volume was up by 19%. Underlying pricing appears to have softened quite substantially compared with fourth-quarter 2023. The company delivered negative 1% pricing, which included a 4% contribution from foreign-exchange-driven pricing actions, primarily related to Argentina. We expect this year, as a whole, to see accelerated volume growth after two years of substantial price increases, some volume weakness related to customer destocking, and customer emphasis on reformulation rather than innovation briefs. In reporting currency, sales growth amounted to 5%, which tracks our expectations for the full year and we’re leaving our fair value estimate unchanged at EUR 108. We believe shares are relatively fairly valued at current levels.

Wide-moat Symrise reported solid organic sales growth of 7.9% for 2023, ahead of our 7.3% forecast and Vara consensus of 7.2%. Adjusted EBITDA of EUR 903 million for 2023 is 2% lower than the prior year and corresponds to an EBITDA margin of 19.1%—at the lower end of the 19%-19.5% guidance the company outlined in December 2023. Some one-offs, primarily related to the Colonel Island production plant disruption, weighed on earnings, with the company reporting a 16% decline in EPS to EUR 2.44.

We confirm our EUR 108 fair value estimate for wide-moat Symrise after reflecting the recent 2023 guidance update in our forecast. The company expects stronger organic sales growth for the year, above the upper end of the previous guidance range of 5%-7%, but softer adjusted EBITDA margin of 19%-19.5%, compared with the previous guidance and our forecast of around 20%. These two developments have a partially offsetting impact and, together with an adjustment for the time value of money, leave our fair value estimate unchanged. Despite the strong organic growth, negative currency translation effects are expected to weigh heavily on the year’s top line and profitability. Detailed 2023 full-year results will be released March 6. At current levels, we believe the share price still offers upside of around 10% for patient investors.

Wide-moat Symrise reported third-quarter 2023 organic sales growth of 6.4%, ahead of the 4.5% Vara consensus. Growth was primarily driven by pricing actions (around 4%), with resilient volumes. Both segments contributed to organic growth, while exchange rates took a toll on reported sales, with a negative impact of 9.4% in the quarter. Management confirmed the 2023 full-year guidance of organic sales growth between 5% and 7% and a normalized EBITDA margin (excluding one-offs) of around 20%, which is aligned with our forecast. The midterm guidance (calling for organic growth between 5% and 7% and an EBITDA margin between 20% and 23%) was extended to 2028 from 2025 previously. Our midterm forecast is consistent with these targets, assuming average organic growth of 6% and an average EBITDA margin of 21% through 2027. Therefore, we make no changes to our forecast at this time and confirm our EUR 108 fair value estimate. We believe shares are attractive, offering an upside of around 15% from current levels.

Wide-moat Symrise reported first-half 2023 EBITDA of EUR 446 million, below our forecast of EUR 484 million and Vara consensus of EUR 479 million. This was primarily due to a one-off hit of EUR 29 million recorded in the scent and care segment, related to a temporary shutdown of its Colonel Island production plant, a business reorganization, and the costs associated with antitrust procedures that were initiated in March by the European Commission. Otherwise, the 8.0% organic growth for the first half was broadly in line with our forecast and the consensus (8.1% in our forecast and 8.6% for consensus), primarily driven by pricing actions. Management reconfirmed the 2023 full-year guidance of organic sales growth at between 5% and 7% and a normalized EBITDA margin (excluding one-offs) of around 20%, which is aligned with our forecast. We don’t expect the one-off impact to be too material to our valuation and maintain our EUR 108 fair value estimate. The share price was down around 2%-3% in early trading, resulting in upside of around 14% to our fair value estimate.

We are lifting our fair value estimates for Givaudan by 4% to CHF 2,900 per share and for Symrise by 10% to EUR 108 per share following a transfer of coverage. We maintain our wide economic moat rating for both companies, supported by switching costs and intangible assets. Symrise is our preferred pick of the two, as we believe the current market price does not fully reflect its peer-leading growth potential, offering upside of around 10% from current levels.

Symrise is one of the four largest companies in the global flavour and fragrance industry. It creates bespoke flavour and fragrance formulations from over 10,000 natural and synthetic raw materials for its customers, which manufacture consumer staples such as food, beverages, and household-care products. F&F companies occupy a strong position in the value chain because their products make up only a small portion of the final product cost but play a decisive role in a consumer’s purchasing decision.

Wide-moat Symrise reported 10.6% organic growth in its first-quarter trading update. This beat the Vara consensus of 8.6%. The Taste, Nutrition & Healthcare segment was the main contributor to the positive development. Despite high inflation and market volatility, Symrise remains optimistic about the rest of the year, with a confirmed outlook aiming for organic sales growth of 5% to 7% and an EBITDA margin of around 20% for the current fiscal year. The company expects to increase sales by 5% to 7% annually until 2025, with an EBITDA margin in the range of 20% to 23%. This is in line with our forecast, and as a result, we are maintaining our EUR 98.5 fair value estimate. At current levels, the shares look overvalued.

Wide-moat Symrise reported 2022 EBITDA of EUR 922 million, a 13% year-over-year increase, before the fourth-quarter EUR 126 million impairment loss. EBITDA margin of 20% (excluding the Swedencare impairment) was below Vara consensus of 20.6% and guidance of 21%. The results were driven by price increases that could not fully offset the higher costs of raw materials, energy, logistics, and personnel, especially in the scent and care segment. For 2023, Symrise is guiding for organic growth of 5%-7%, above our forecast, and EBITDA margin around 20%, which is below our estimate and Vara consensus. However, we don’t see anything fundamentally changing the long-term outlook as the group reaffirmed its long-term profitable growth path. We don’t anticipate making a material change to our EUR 98.50 fair value estimate. The shares are trading in 3-star territory and down 3% intraday, but peers are also trading in negative territory.

Wide-moat Symrise released preliminary numbers for full-year 2022 given EBITDA is expected to be below Vara consensus. Furthermore, the company announced a EUR 126 million impairment charge related to its interest in Swedencare AB. Shares were down around 6% intraday, worst among its peers. Full-year organic growth is expected to be 11.4%, better than consensus of 10.7%. However, the adjusted EBITDA margin (excluding the Swedencare AB impairment) is expected to be 20%, below consensus expectations for 20.9%. The margin decline is likely the biggest surprise given Symrise just confirmed its guidance for 21% in the third quarter. Full-year EBITDA is expected to be EUR 921.6 million, which is below the consensus estimate of EUR 956.6 million. Our full-year estimates were more conservative than consensus as we forecast 10% organic growth and EBITDA of EUR 858 million. As a result, we don’t expect to make a material change to our EUR 98.50 fair value estimate for Symrise. After their Jan. 23 decline, the shares look fairly valued.

Wide-moat Symrise reported third-quarter organic sales growth of 13.6% in its trading update, beating Vara consensus of 10.9%. For the full year, Symrise upgraded its organic sales growth guidance to “more than 10%” from “significantly above 7%” previously. Consensus was already expecting about 10%. Importantly, the EBITDA margin is still expected to be 21%, meaning Symrise should also see strong earnings growth this year despite sharply rising raw material and energy cost inflation. Shares were up around 2%-3% intraday, reflecting consensus expectations that were already above management's guidance. We expect to raise our near-term forecast, but don’t expect to make a material change to our EUR 98.50 fair value estimate.

Wide-moat Symrise reported first-half EBITDA of EUR 486 million, up 16% versus 2021 and slightly above Vara consensus. First-half organic growth of 10.2% (12% for the second quarter) was ahead of expectations with good price increases offsetting rising costs. Given progress to date, Symrise raised 2022 guidance for organic growth significantly above 7% (previously 5%-7%) with an EBITDA margin of around 21% (unchanged). We expect to tweak our near-term forecast upward, but don’t expect to make a material change to our EUR 98.50 fair value estimate. At current levels, the shares look overvalued.

Symrise is the fourth-largest company in the global flavor and fragrances, or F&F, industry, with 12% market share. The company creates customised flavour and fragrance formulations from over 10,000 natural and synthetic raw materials for customers that manufacture consumer staples such as food, beverages, and household-care products. F&F companies occupy a strong position in the value chain because their products make up only a small portion of the final product cost, but play a decisive role in the consumer’s purchasing decision.

The European chemicals sector enjoyed strong investment returns once central banks turned on the liquidity taps to combat the coronavirus pandemic in March 2020. At the start of 2022, the outlook remained bright as demand remained robust while inflation, particularly for raw materials, was expected to peak in the first half of 2022. However, we think the Russia-Ukraine war has changed the equation, leading to a more ominous picture in the back half of the year given our expectations for sustained raw material inflation and rising interest rates. Considering guidance provided by companies in the sector does not account for the impact of the Russia-Ukraine war, we think sector guidance is generally too optimistic and thus, cuts may be necessary in the second half of 2022. While our 2022 outlook for the sector has dimmed, we see opportunities at current prices. For the industrial chemical companies, we prefer Lanxess given its compelling valuation (0.5 times price/fair value estimate) and dual catalysts (business transformation, lithium project) that should create value regardless of the economic environment. For the consumer chemical companies, we prefer Chr. Hansen given its relatively attractive valuation versus peers, wide moat rating, and leading organic growth outlook.

Wide-moat Symrise reported 8.3% organic growth in its first-quarter trading update, soundly beating the Vara consensus of 5.8% due to better-than-expected performance in the taste, nutrition, and health segment. The market was pleased with the results, sending the shares up 5% intraday. We currently expect 7% organic growth for the year and don’t expect to make a material change. Symrise’s confirmation of guidance for 5%-7% organic growth would support this notion. Accordingly, we expect to maintain our EUR 90 fair value estimate. At current levels, the shares look overvalued.

Wide-moat Symrise reported 2021 EBITDA of EUR 814 million, up 10% over 2020 but broadly in line with Vara consensus and our estimate. Organic growth for the year was 9.6%, which was ahead of the 9% guidance set last quarter due to strong performance in the fourth quarter in taste, nutrition, and health. Guidance for 2022 was the usual 5%-7% organic sales growth with an EBITDA margin around 21%, also in line with expectations. Shares were flat at the open but are now up 3%-4% since the conference call, likely reflecting the company’s confidence in managing raw material inflation in 2022. We remain moderately cautious on margins versus consensus in 2022 but don’t expect to make any material changes to our forecast or EUR 90 fair value estimate. Shares continue to look overvalued despite being down 15% from the recent peak in December 2021.

Wide-moat Symrise reported 8.3% organic growth in the third quarter, exactly in line with the Vara consensus. Shares are trading flat intraday. The company updated organic growth guidance for 2021 to 9% (from above 7% previously) with an EBITDA margin above 21% (unchanged). Given year-to-date results, we are raising our 2021 organic growth estimate to 9.1%. That and some other tweaks to our forecast boost our fair value estimate to EUR 90 from EUR 85. However, shares continue to look expensive in our discounted cash flow model.

Symrise is the fourth-largest company in the global flavor and fragrances, or F&F, industry, with 12% market share. The company creates customised flavour and fragrance formulations from over 10,000 natural and synthetic raw materials for customers that manufacture consumer staples such as food, beverages, and household-care products. F&F companies occupy a strong position in the value chain because their products make up only a small portion of the final product cost, but play a decisive role in the consumer’s purchasing decision.

Wide-moat Symrise reported first-half EBITDA of EUR 420 million, up 7% versus 2020 and in line with the Vara consensus. Organic growth of 9.7% also met expectations. Given progress to date, Symrise raised 2021 guidance to organic growth above 7% (previously 5%-7%) and an EBITDA margin of more than 21% (previously around 21%). We already have a similar forecast, so we don’t expect to make any material changes to our estimates or EUR 85 fair value estimate. At current levels, the shares look overvalued.

Wide-moat Symrise reported 10.5% organic growth in its first-quarter trading update. This beat the Visible Alpha consensus of 8.5%. However, market expectations likely rose after Givuadan’s big beat earlier in the month. Consequently, Symrise shares are down 1% intraday. We’ve raised our 2021 organic growth forecast to 7.3% from 5.8%, but the positive effect is offset by an increasing currency headwind. As a result, we are maintaining our EUR 85 fair value estimate. At current levels, the shares look overvalued.