Givaudan(GVDNY) - 2023 Q4 - Earnings Call Transcript

Financial Performance - Total sales reached CHF 6.9 billion, with a like-for-like growth of 4.1%, while sales in Swiss francs declined by 2.8% due to currency effects [5][23] - EBITDA remained stable at CHF 1,473 million, with an increase of 8.8% in local currencies, resulting in a comparable EBITDA margin increase of 150 bps to 22.4% [5][25] - Free cash flow reached a record high of CHF 920 million, corresponding to 13.3% of sales, exceeding the target range of above 12% [6][29] Business Line Performance - Fragrance and Beauty division sales amounted to CHF 3,312 million, up 7.6% on a like-for-like basis, driven by strong growth in Fine Fragrances [11][26] - Taste and Wellbeing division sales were CHF 3,603 million, growing 1.1% on a like-for-like basis, but declining 6.7% in Swiss francs due to weaker demand in North America and Asia Pacific [12][27] Market Performance - High growth markets saw a like-for-like growth of 10%, particularly driven by Latin America and the Middle East, contributing to 46% of group sales [8][9] - Mature markets experienced a slight decline of 0.6%, primarily due to North America, while Europe showed solid growth, especially in Fine Fragrances [9][10] Company Strategy and Industry Competition - The company is focused on growth with purpose, aiming for a like-for-like average sales growth of 4% to 5% and free cash flow above 12% [34] - Strategic pillars include expanding the portfolio, extending customer reach, and focusing on market strategies, supported by innovation and sustainability [33][34] Management Commentary on Operating Environment and Future Outlook - Management acknowledged challenges such as destocking, shrinkflation, and lower consumption impacting volume growth, but expressed optimism for a return to normalized growth [38][39] - Input costs are expected to remain stable, with a proactive approach to operational excellence and supply chain management [35][40] Other Important Information - The Board of Directors proposed a dividend of CHF 68, marking the 27th consecutive increase for shareholders [6][30] - The company has made significant progress in sustainability, achieving a 43% reduction in scope 1 and 2 emissions compared to 2015 [20] Q&A Session Question: Volume outlook for 2024 and impact of destocking - Management expects destocking and shrinkflation to be one-time issues, with a return to normalized growth anticipated [38][39] Question: Margin improvement across divisions - Management aims for an EBITDA margin of 24%, with ongoing efforts to improve gross profit margins, particularly in the Taste and Wellbeing division [40][41] Question: Consumer behavior trends in Asia Pacific - Management views the shift to kitchen solutions as a temporary response to inflation, not a long-term trend [45] Question: Free cash flow levers and M&A plans - Future free cash flow improvements are expected from increased profitability and reduced working capital [48][49] Question: Fine Fragrances capacity and growth - Management is confident in current production capacity to accommodate growth in Fine Fragrances without immediate need for expansion [53]