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COMPANY REPORT

Firmenich reports solid half year results despite pandemic
Friday, 19 February, 2021, 08 : 00 AM [IST]
Geneva, Switzerland
Firmenich International SA reported its Half Year Results for the six months ended December 31, 2020.

Financial Highlights
• Total Revenue reached CHF 1,997 million, up 2.3 per cent on an organic basis at constant currency1. Including acquisitions, Total Revenue increased 14.0 per cent year-over-year at constant currency. On a reported basis, Total Revenue increased 4.9 per cent year-over-year

• Adjusted EBITDA2 of CHF 367 million, up 1.6 per cent year-over-year on an organic basis at constant currency, and down -12.4 per cent year-over-year on a reported basis

• Adjusted EBITDA margin of 18.4 per cent. On an organic basis at constant currency, Adj. Ebitda margin remained stable year-over-year. On a reported basis, Adj. Ebitda margin decreased by 360 basis points, due to the negative impact of foreign exchange and the impact of the pandemic on our acquisitions

• Free Cash Flow3 of CHF 182 million, up 20.7 per cent year-over-year

• EBITDA to Free Cash Flow conversion ratio of 50 per cent, an increase of 13 percentage points from 37 per cent in HY 2020

Operating Highlights
• Demonstrated sustained organic revenue growth across Taste and Beyond and Perfumery and Ingredients divisions, despite the global Covid-19 pandemic
 
• Delivered double-digit revenue growth in key geographies: China  plus 15.1 per cent, North America plus 12.8 per cent and India plus 11.4 per cent, on an organic basis at constant currency
 
• The company is in the process of integrating DRT, our largest ever acquisition, to build the leading innovation platform for renewable, biodegradable and sustainable ingredients. The pandemic had a material impact on revenue and profit during the first half of the year
 
• Strengthened leadership team with new senior appointments and a new Perfumery leadership organisation
 
• Cultivated responsible business leadership, obtaining a CDP AAA rating for the 3rd year running, and an industry-leading Sustainalytics ESG rating of 8.6, in the top 1 per cent of the 13,500 companies rated

Patrick Firmenich, chairman of the board, said, “Firmenich continued to perform strongly across its business in the first half of FY2021. I would like to warmly thank all of our 10,000 colleagues around the world for their tremendous resilience and agility. For more than 125 years, our people have been the bedrock of our success. Together, we have weathered many major global crises, and I am confident we will once more emerge stronger from these testing times."

Gilbert Ghostine, CEO, Firmenich, said, “Firmenich delivered a solid performance in the past six months, underpinned by sustained organic growth, despite new peaks in the pandemic. In a challenging environment, I am pleased that we demonstrated again the strength of our business, growing at double-digit rates in key markets such as China, North America and India. Thanks to the dedication of our colleagues, we maintained the highest level of service for our customers, supplying the global food chain and essential home and personal care products. I firmly believe that we are well positioned to capture the opportunities that will arise after this public health crisis."

HY2021 Performance
Total Revenue reached CHF 1,997 million, up 2.3 per cent year-over-year on an organic basis at constant currency. Including acquisitions, Total Revenue increased 14.0 per cent year-over-year at constant currency. On a reported basis, Total Revenue increased 4.9 per cent year-over-year. Foreign exchange, in comparison to prior year rates, had an unfavourable impact of minus CHF 174 million on Total Revenue.

Taste and Beyond Revenue increased plus 3.6 per cent,  organically at constant currency, driven by Beverages, Sweet Goods, and Sugar Reduction, more than offsetting the temporary negative impact of the crisis on Foodservice and Savoury goods.

Perfumery and Ingredients Revenue increased plus 1.6 per cent, organically at constant currency, driven primarily by Consumer Fragrance and Ingredients. The Mid-Market Perfumery platform in North America delivered strong double-digit organic growth. Fine Fragrance continues to be impacted by the retail closures and travel restrictions, yet the company has seen an encouraging sequential improvement in the second quarter.
 
Adjusted Ebitda
Adjusted Ebitda reached CHF 367 million, up 1.6 per cent on an organic basis at constant currency, and down 12.4 per cent on a reported basis. Foreign exchange, in comparison to prior year rates, had an unfavourable impact of minus CHF 72 million on the Adjusted Ebitda.

Adjusted Ebitda margin was 18.4 per cent, a decrease of 3.6 percentage points in comparison to 22.0 per cent in the prior year. Half of this decrease is explained by foreign exchange and the remaining half is due to the impact of the pandemic on acquisitions. On an organic basis at constant currency, Adjusted Ebitda margin stayed constant in comparison to the prior year.

Cash Flow
Free Cash Flow increased 20.7 per cent year-over-year to CHF 182 million, thanks to tight working capital management, underscoring the prudent execution during the crisis. As a result, the conversion ratio of Ebitda to Free Cash Flow reached 50 per cent, an increase of 13 percentage points in comparison to the prior year.

DRT Integration
Last fiscal year, the company completed the transformational acquisition of DRT, a leader in naturally-derived renewable ingredients. This acquisition enables the company to build the world’s leading innovation platform for renewable, biodegradable and sustainable ingredients for Fragrances, Flavours and Nutrition. While the company is in the process of integrating DRT, revenue and profit were materially impacted by the pandemic in the first half of the year, as a result of lower volume and demand in the DRT industrial end markets as well as in the fine fragrance market.

Despite this soft start, the company remain entirely confident in the strategic fit of the acquisition, as well as in the quality of the assets and the team. Feedback from customers on the value of our unique and proprietary access to renewable ingredients confirms the company’s confidence that DRT provides a long-term competitive advantage.

Responsible Business
The company has continued to strengthen its leading position in Environmental, Social and Governance issues. Running the business responsibly and sustainably is a core pillar of the company culture. The company is very proud of its ESG credentials and awards that recognise its commitment to both climate change and social causes.

Among other achievements, the company is one of only two companies worldwide to have been awarded, for the third year in a row, the CDP AAA rating for climate change, water security and forests. Additionally, the company is proud to have received an ESG rating of 8.6 from Sustainalytics, placing it in the lead in the industry and in the top 1 per cent of companies rated worldwide.
 
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