Givaudan: Solid Underlying Performance Clouded by Negative Currency Effects

Wide-moat Givaudan GIVN reported third-quarter 2023 organic sales growth of 4%, ahead of company-compiled consensus of 2.5%. Both reporting segments had a relatively equal contribution to the outperformance. The fragrance and beauty segment delivered organic sales growth of 6.5% (compared with 4.9% consensus) and the taste and wellbeing segment delivered 1.7% organic sales growth (compared with 0.1% consensus). Still, despite the solid like-for-like growth for the group a negative currency effect of around 8% in the quarter meant that sales, reported in Swiss francs, were lower year on year. All in all, we are maintaining our CHF 2,900 fair value estimate and we expect full-year organic sales growth of 3.1%, but a decline of around 3% for sales in Swiss francs. We believe shares are fairly valued at current levels.

The taste and wellbeing segment is back to growth in the third quarter after a weak first half (when it reported negative 0.9% organic sales growth). The recovery is the result of strong growth in snacks and sweet goods, partially offset by a decline in volumes in other end markets such as savory and dairy. North America continues to be challenging for Givaudan with a like-for-like decline of 10.6% in sales in the first nine months for the segment. The region is also weighing on the group’s overall performance in mature markets with a like-for-like sales decline of 2.1% between January and September, compared with growth of 9.3% in high-growth markets.

In fragrance and beauty, the fine fragrances subsegment continued to post stellar organic growth of 13.7% for the first nine months, in addition to the 14.8% it reported in the comparable period last year. This is primarily driven by continued strong demand at the higher end of the market as well as further price increases implemented across the business to compensate for higher input costs.