In the first half year of 2021, Symrise AG has performed outstandingly well. In spite of the ongoing coronavirus pandemic across the world, the company’s sales and earnings increased substantially. Organic sales growth amounted to 9.7%. In the reporting currency – without portfolio and currency translation effects – sales increased by 4.8% to 1,908 million euros (H1 2020: 1,821 million euros). Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 6.8% to 420 million euros compared to the same period of the previous year. The EBITDA margin developed particularly well with a value of 22.0% (H1 2020: 21.6%). Net income for the period increased by 15.9% to 196 million euros. Against the background of the good performances during the first half of the year, Symrise raised the forecast for the full year and is targeting organic sales growth of more than 7% (previously 5-7%) and an EBITDA margin of more than 21% (previously around 21%).
“The progress made in combatting the worldwide coronavirus pandemic had a positive impact on our business during the second quarter. Demand increased significantly in many areas. In particular, there was strong demand for cosmetics and fine fragrance applications again. Product solutions for beverages and food also developed very dynamically because falling case numbers for the coronavirus fuelled out-of-home consumption,” commented Dr Heinz-Jürgen Bertram, chief executive officer of Symrise AG. “Although the pandemic will persist, we are very confident for the coming months following the good first half of the year, and we are more confident about our performance in the future. We are therefore raising our forecast for the organic sales target, as well as for the profitability target.”
Strong growth in the Group and the segments
In the reporting currency, the Symrise Group achieved sales growth of 4.8% to 1,908 million euros (H1 2020: 1,821 million euros). The acquisition of the Fragrance and Aroma Chemicals business from the US company Sensient in April 2021 contributed 14.4 million euros. In spite of the weaker prior-year figures due to the pandemic, organic sales growth was even stronger: During the first six months, Symrise increased sales by 9.7%. Alongside catch-up effects in the first quarter resulting from the cyber-attack in December, the good dynamic in the second quarter made a contribution. Due to the accelerating business and higher demand, sales increased organically between April and June by 8.8%.
As of 1 April 2021, Symrise AG modified segment reporting and from now on will publish earnings figures for the two segments Scent & Care and Flavour & Nutrition. As part of a strategic realignment, the previously separate segments Flavour and Nutrition have now been combined in the segment Flavour & Nutrition. Activities for beverages and food, as well as the applications for pet food and probiotics are now grouped in this segment. The combination will allow a more targeted response to customer needs as well as the expansion of customer relationships. Furthermore, processes will be optimised by pooling competences and technologies.
The Scent & Care segment
Scent & Care, the business with fragrances, aroma molecules and cosmetic ingredients, achieved very good organic sales growth of 9.0% in the first half year of 2021. Taking currency translation effects into account, sales amounted to 749 million euros in the first six months and rose significantly compared to the prior-year period (H1 2020: 711 million euros). The Fragrance and Aroma Chemicals business from Sensient contributed 14.4 million euros to this. Particularly during the second quarter, normalisation of consumer demand began to emerge as battling the pandemic progressed. Sales in the Fine Fragrances business unit and Cosmetic Ingredients division increased strongly.
The Fragrance division achieved overall organic growth in the double-digit percentage range. Demand in the Fine Fragrances business unit recovered in virtually all regions. Sales even partly exceeded the level prior to the coronavirus. The Consumer Fragrance and Oral Care business units in each case delivered high single-digit organic growth in spite of exceptionally high prior-year sales.
Sales in the Aroma Molecules division were at the prior-year level. The significant growth in the Menthols business unit was able to almost entirely compensate the lower demand for aroma molecules and the fall in their market prices.
The Cosmetic Ingredients division benefited from the increasing demand for luxury body care products and cosmetics, and achieved a double-digit increase in sales. The overall demand for sun protection products continued to remain behind the prior year, although an increase in travel activity has started to take hold since the second quarter.
Scent & Care increased EBITDA including a one-off contribution from the Sensient acquisition by 16 million euros to 162 million euros (H1 2020: 146 million euros). Scent & Care achieved an EBITDA margin of 21.7% (H1 2020: 20.6 %) respectively 19.9% (not including one-off effect).
The Flavour & Nutrition segment
The combined Flavour & Nutrition segment increased its sales organically by 10.1%. Sales in the reporting currency increased to 1,159 million euros and thereby significantly exceeded the prior-year figure (H1 2020: 1,110 million euros). In the second quarter, the segment recorded gradual normalisation of consumer behaviour. The increase in out-of-home consumption exerted a positive effect on demand for beverage products. At the same time, the trend towards healthy cooking at home and the continuing high demand in pet food solutions ensured strong growth.
Applications for beverages recorded very good organic sales growth in the double-digit percentage range. The biggest growth was generated in the US market, China, Brazil as well as Germany, the United Kingdom and Ireland. Sales in the Savoury business unit primarily increased in the national markets of South Africa, Egypt, Mexico and Brazil. They made a significant contribution to exceeding the prior-year figures, which were already strong.
Sales for sweet product solutions remained constant at the prior-year level. The regions of Asia/Pacific and Latin America recorded significant sales growth, while the regions EAME (Europe, Africa, Middle East) and North America were unable to continue at the prior-year level.
The Pet Food business unit continued the strong development from the prior year and achieved organic growth in the double-digit percentage range. Sales development in Mexico, Argentina, China and South East Asia was especially dynamic.
The Food business unit benefited from the recovery in demand in many markets, particularly in Western Europe. Organically, the business unit achieved pleasing growth.
Sales development in the Aqua business unit was influenced by the continuing low demand for feed solutions in aquaculture.
ADF/IDF developed very well and generated organic growth in the double-digit percentage range. Growth was primarily driven by synergy effects in the Group and good growth in the Food and Pet Food business units in the American domestic market.
Probi recorded organic sales growth in the high single-digit percentage range and benefited mainly from product launches in the EAME region.
EBITDA for the Flavour & Nutrition segment rose by 4.2% to 258 million euros (H1 2020: 247 million euros). The EBITDA margin at 22.2% stayed at strong prior-year level (H1 2020: 22.2%).
In the first half year of 2021, Symrise operated highly profitable despite the continued challenging economic environment resulting from the global pandemic. The Group generated earnings before interest, taxes, depreciation and amortisation (EBITDA) of 420 million euros. This corresponds to an increase of 6.8%, which is primarily driven by the profitable sales growth and sustained strict cost management, as well as a positive one-off effect in the amount of 13.2 million euros from the acquisition of the Fragrance and Aroma Chemicals business from Sensient. The EBITDA margin increased by 0.4% to an outstanding 22.0% (EBITDA H1 2020: 21.6%).
Net income for the period and earnings per share
Net income for the period increased to 196 million euros in the reporting period and was therefore 27 million euros above the value for the prior-year period (H1 2020: 169 million euros). Undiluted earnings per share rose by 16 % to 1.45 euros after 1.25 euros in the first half of the previous year.
Operating cash flow
Operating cash flow at 136 million euros was 83 million euros below the prior-year figure of 219 million euros. This is essentially due to increased trade receivables and higher tax payments. The business free cash flow amounted to 181 million euros (H1 2020: 191 million euros) for the first six months of the current fiscal year.
Net debt increased by 184 million euros to 1,531 million euros compared to the reporting date of 31 December 2020. The ratio of net debt including leasing liabilities to EBITDA therefore amounts to 2.0. Net debt including pension obligations and leasing liabilities amounted to 2,145 million euros, which corresponded to a ratio of net debt and EBITDA of 2.8.
At the beginning of May, Symrise successfully refinanced the existing Revolving Credit Facility of 300m euros from the year 2015. The new Revolving Credit Facility with a volume of 500 million euros and a three-year term is linked to indicators based on sustainability. Metrics include further reduction of greenhouse gas emissions, strengthening responsible procurement processes and efficient water consumption.
Raising the forecast for 2021 On the basis of its global presence, the continually growing, diversified portfolio and its broad customer base, Symrise continues to see itself as being robustly and reliably positioned despite the currently challenging market environment that continues to be defined by the coronavirus pandemic. The Group is fully operational worldwide and is able to supply customers sustainably.
The change in consumer behaviour resulting from the pandemic, which partly led to a shift in demand, is currently normalising. In particular, demand for the applications for luxury products and product solutions for out-of-home consumption is rising again and supporting the growth trajectory of the Group. Based on the very good development in the first half year, Symrise is looking ahead with confidence to the second half of the year 2021 even though it is likely that the framework conditions imposed by the pandemic will continue to prevail almost unchanged. Symrise is raising the targets defined for the fiscal year 2021: Organic sales growth is projected to increase to above 7% instead of the previous forecast of 5-7%. The targeted EBITDA margin is now forecasted at above 21% instead of around 21%.
The medium-term targets continue to be unchanged. The company is targeting its sales increase to a corridor between 5.5 and 6.0b euros by 2025. Symrise intends to achieve this increase by average annual organic growth of 5-7% (CAGR) and complementary strategic acquisitions. Profitability is projected in a target corridor of 20-23% over the long term.