Dusseldorf The success story of the fragrance and aroma manufacturer Symrise gets a small setback. After twelve years of increasing profits, CEO Heinz-Jürgen Bertram had to present a lower result on Wednesday morning. Unadjusted earnings before interest, taxes, depreciation and amortization (Ebitda) fell last year by two percent to 795.4 million euros.
The main reason for this was a write-down of EUR 126 million on the investment in Swedencare, a manufacturer of nutritional supplements for pets. Symrise had to announce this in a profit warning in mid-January. The Dax group holds almost 30 percent of the Swedish biotech company. Without the value adjustment, profit would have increased by 13.3 percent – to 921.5 million euros.
With or without impairment: Symrise’s profitability fell short of expectations in the past year. The Ebitda margin is 17.2 percent due to the depreciation. Even without this, the return would have been 20 percent – 1.3 points less than in the previous year. Like its competitors, Symrise is suffering from rising costs for materials, energy and raw materials and from subdued consumer demand.
Because the group supplies all major food and cosmetics manufacturers such as Nestlé, Beiersdorf and L’Oréal with fragrances and flavorings. The company’s products make toothpaste taste like mint or ice cream like vanilla. On average, consumers come into contact with Symrise products 20 to 30 times a day.
Searches at Symrise
However, Symrise has to deal with an antitrust investigation. Symrise confirmed to the Handelsblatt that there had been searches on Tuesday. You cooperate with the authorities. The EU antitrust authorities are investigating indications that there have been agreements on the delivery of fragrances and flavorings that violate antitrust regulations.
In addition to the group from Holzminden in Lower Saxony, the two Swiss companies Firmenich and Givaudan and the US group International Flavors & Fragrances are affected. These four major fragrance and flavor manufacturers form an oligopoly and together control over 60 percent of the 39 billion euro global market.
economic miracle of the 2010s
Symrise is considered the economic miracle of the 2010s: Since 2006, sales have grown by almost eight percent a year on average. Even during the pandemic, the group was highly profitable with a margin of around 20 percent. In autumn 2021, the company finally rose to the leading index Dax.
“Despite inflation and volatility in our core markets, we continued to grow profitably.”
(Photo: Symrise)
The architect of success is Bertram. The son of a farmer worked his way up to the top of the group after studying chemistry. He has been CEO of Symrise since August 2019. “2022 was another very successful fiscal year for Symrise. We continued to grow profitably despite inflation and volatility in our core markets,” he said on Wednesday. Symrise was able to increase its sales organically by 11.4 percent to 4.6 billion euros.
Industry experts are more skeptical about the balance sheet. “The numbers are certainly a temporary setback after years of success,” said analyst Andreas von Arx from Baader Bank to the Handelsblatt. The write-off is “of course already scratching the CEO’s image,” according to the expert.
>> Read more: Economic miracle of the 2010s: Why the unknown Dax newcomer Symrise has been growing for years
In fact, Bertram has had a lucky hand with numerous acquisitions in the past and has profitably integrated the companies into Symrise. The most daring and successful acquisition of 1.3 billion euros in 2014 was that of Diana, a leading French manufacturer of flavors primarily for the pet food industry. Symrise supplies companies like Mars, which are also large animal feed producers.
The aroma business with pet food has high margins and is growing by ten percent every year because many consumers do not save on their four-legged friends. In 2025, Bertram wants to turn over 1.5 billion euros in this area, currently it is 600 million euros.
Stock is under pressure
The write-down of Swedencare also put the share under pressure, it lost six percent after the profit warning and has not been able to recover to this day. In any case, the value of the Symrise papers is declining. At the end of 2021, the share was still trading at a good 130 euros, and the price is currently a good 95 euros. The profit warning has depressed investor confidence, says Baader Bank analyst von Arx as one reason for the weakening share price.
Nevertheless, Bertram is sticking to his medium-term goals, the manager confirmed on Wednesday morning. The group wants to increase its sales by five to seven percent annually and thus grow faster than the market. By the end of the 2025 financial year, Symrise is aiming for sales of 5.5 to 6 billion euros and an Ebitda margin in the range of 20 to 23 percent. This year, Symrise plans to increase its dividend for the 13th time in a row.
Arx analyst considers Symrise’s goals to be realistic and achievable. The depreciation is a one-time effect, Symrise will succeed in enforcing price increases. Symrise now generates a third of its sales and thus more than the competition outside the traditional flavor and fragrance sector – in high-margin areas such as pet food, health or care cosmetics. This allows Symrise to grow faster than its competitors.
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