Givaudan sees coronavirus creating hunger for soap, snacks
Apr 8, 2020
Swiss fragrance and flavour maker Givaudan said demand for soap, shampoo and snacks would drive sales in April as people stock up during the coronavirus pandemic after like-for-like sales rose 5.4% in the first quarter.
Givaudan makes flavours for food and drinks and fragrances for washing powder and toothpaste - businesses that should prove resilient during the novel coronavirus crisis - but its fine fragrances took a hit as many perfumeries are closed and tourists stay home.
"We've seen an acceleration of demand towards the end of the first quarter and we have a good visibility for the month of April that is confirming this trend," Chief Executive Gilles Andrier told Reuters in a telephone interview on Wednesday.
He said fine fragrances, which represent about 10% of group sales, would see a further decline, but demand in other business areas should hold up, allowing the group to confirm its guidance of 4%-5% average sales growth per year until the end of 2020.
The group's shares were down 1.9% at 0832 GMT, lagging a 1.1% weaker sector. Analysts, however, are bullish on the stock, which has outperformed the European chemicals sector index so far this year.
Andrier said growth in the first quarter had helped to sustain profitability and costs were falling as business travel, capital investment, hiring and project activity had largely ceased because of the virus.
Supply chains, however, are a challenge to meeting demand.
"Everything is hectic, it's a lot of work, a lot of exceptions, trying to find ways, changing suppliers, finding new routes," Andrier said, citing difficulties in India where the company normally sources jasmine, spices and some chemicals.
Andrier said Givaudan had centralised its supply chain management in Budapest, Buenos Aires and Kuala Lumpur, which had proved helpful in the crisis.
Governments around the world have enforced lockdowns to try to slow the spread of the novel coronavirus, severely impacting businesses and people's
Givaudan had to close a production site near Zurich in early March after an employee tested positive for the virus, but Andrier said most factories were operating at capacity and often 24 hours a day to limit contact among staff.
"Givaudan offers a highly attractive defensive profile, as well as strong cash returns," Vontobel analyst Jean-Philippe Bertschy, who rates the stock buy, said in a note, adding the crisis should lead to a greater focus hygiene and food safety around the world.
© Thomson Reuters 2020 All rights reserved.