Symrise: Continued Solid Organic Sales Growth and Midterm Guidance Extended to 2028

Wide-moat Symrise SY1 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.

Growth in the scent and care segment accelerated in the third quarter (7.1% organic growth in the third quarter compared with 2.4% in the first half). Similar to numbers reported by wide-moat Givaudan, the fine fragrances subsegment continued to display a strong performance, delivering double-digit growth for the year to date on top of strong growth in the previous year. This was offset by continued weakness in the aroma molecules division, which has been the most affected by customer inventory management measures throughout the year and more recently by the shutdown at the Colonel’s Island production plant in the United States.

The taste, nutrition, and health segment saw a relative slowdown in the third quarter (6% organic growth in the third quarter compared with 11.4% in the first half) driven by a slowdown in pet food and probiotic sales. Food and beverage division sales remained resilient, posting high-single-digit organic growth for the first nine months.