Givaudan Says Cost Cuts Help Offset Strong Franc Impact

By John Revill

ZURICH--Givaudan SA (GIVN.VX) on Friday reported an 11% increase in first-half net profit as cost-cutting and a change to its pension plans helped the world's largest flavors and fragrance maker offset the stronger Swiss franc and flat demand for perfumes.

Geneva-based Givaudan said net profit for the six months to June 30 rose to 339 million Swiss francs ($354 million) from 305 million francs a year earlier. The figure beat analyst expectations of 294 million francs.

Revenue for the period fell to 2.18 billion francs from 2.19 billion francs, matching the 2.18 billion francs expected by analysts.

Givaudan, which supplies flavors to food companies such as Nestle SA (NESN.VX), Mondelez International Inc. (MDLZ) and Unilever NV (UL), said its profitability had been "distorted" by the impact of the currency movements following the appreciation of the Swiss franc.

The franc has surged roughly 13% in value against the euro this year since the Swiss central bank scrapped its cap on the Alpine country's currency, reducing the number of francs Swiss companies receive from their foreign sales. The company has responded by cutting internal costs, while it also gained 20 million francs from changing its pension scheme.

During the six months Givaudan said sales from its fragrance unit were flat when currency effects were removed, but fell 1.1% in Swiss francs. The flavors division increased 0.4%, helped by growth in Asia and Latin America.

Givaudan kept its guidance of 4.5% to 5.5% sales growth for the year, excluding currency fluctuations and acquisitions, and said it still expects to gain market share.

-Write to John Revill at [e-mail]

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