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Double-digit Revenue growth[1] and high-single-digit Adjusted EBITDA growth[1] against a backdrop of a volatile inflationary and foreign exchange environment
GENEVA, Feb. 16, 2023 /PRNewswire/ -- Firmenich International SA ("Firmenich"), the world's largest privately-owned fragrance and taste company, is announcing its Half Year Results for the six months ended 31 December 2022.
Financial Highlights
"Firmenich has delivered double-digit Revenue growth in the first half of FY 2023, supported by the strength of our superior customer service and diversified, sustainable business model. These accomplishments are set against a challenging inflationary environment, particularly for raw materials and energy. We are proud of our leadership in science and the recognition of our world-class progress as a responsible business. This drive for sustainability remains at the core of our long-term strategy," said Patrick Firmenich, Chairman of the Board
"During the first half of FY 2023, we have continued to demonstrate our agile and superior execution while navigating volatile market conditions. We are emerging stronger across key segments thanks to our focus on leading creativity, innovation, and best-in-class customer service," said Gilbert Ghostine, CEO of Firmenich
Operating Highlights
HY 2023 performance
Revenue
Revenue reached CHF 2,440 million, up 10.5%[3]. Acquisitions contributed CHF 21 million or +1.0 percentage points to Revenue growth, leading to 11.5% growth at constant currency, driven by a balanced contribution of volume / mix and pricing. Foreign exchange had an unfavorable impact of CHF -58 million or -2.6 percentage points, mainly due to the unfavorable impact of the strong Swiss Franc, in particular against the Euro. On a reported basis, Revenue increased 8.9% year-over-year.
Taste & Beyond delivered an industry-leading Revenue growth of 13.3%, driven by a balanced contribution of volume / mix and pricing across all segments and strategic initiatives. Acquisitions contributed +2.9 percentage points to Revenue growth leading to 16.2% growth at constant currency. We made strong progress in our drive to establish strategic partnerships with key customers, to help them win the hearts and minds of consumers through our strengths in innovation, consumer insights, naturals, and particularly in "beyond taste" solutions as we continue to lead the diet transformation.
Perfumery & Ingredients Revenue increased 9.1%, driven by strong growth in Fine Fragrance and Ingredients, while Consumer Fragrances returned to mid-single-digit growth. Fine Fragrance delivered industry-leading growth of 20.2%, due to a strong pipeline of innovation aligned with customer needs and our leadership in the prestige segment. In Ingredients, we continued to achieve strong momentum, with robust Revenue growth across the portfolio, supported by strong pricing measures and sustained customer demand.
Our geographic diversification is one of our strengths and we have delivered Revenue growth across all regions, with strength in key geographies, including, in particular, in India (+23.6%), China (+18.3%), and Europe (+16.6%) at constant currency.
Adjusted EBITDA
Adjusted EBITDA reached CHF 440 million, down 4.4% year-over-year on a reported basis. In comparison to prior year rates, foreign exchange had a negative impact of CHF -54 million on the Adjusted EBITDA. At constant currency, Adjusted EBITDA increased by 7.3%.
Adjusted EBITDA margin was 18.0%, down 2.5 percentage points year-over-year, which includes a negative impact of 170 bps from foreign exchange headwinds and a negative 90 bps of mathematical dilution from inflation net of price increases.
We have been facing an increasingly challenging environment, particularly regarding inflationary pressures for raw materials and energy. We have taken measures to proactively mitigate the negative impact on margins, including further pricing actions and the application of an energy surcharge, while preserving our best-in-class service levels. Our agile execution and adaptability have enabled us to weather volatile market conditions and continue to meet the increasing demand from our customers across all geographies. Despite these volatile market conditions, we have continued to invest in innovation and quality of future growth, maintaining our research and development expenses at 8.6% of revenues.
Free Cash Flow
Free Cash Flow, adjusted for the impact of the non-recurring expenses linked to the DSM-Firmenich merger was CHF 11 million, compared to CHF 162 million in the prior year. Reported Free Cash Flow was negative CHF 17 million, including the impact of CHF 28 million of non-recurring cash expenses linked to the DSM-Firmenich merger.
The decline in Free Cash Flow was primarily driven by the unfavorable change in working capital linked to the CHF 172 million impact of higher inventories required to preserve customer service levels and ensure safety of supply. In addition, a strong Revenue performance towards the end of the second quarter led to a higher level of receivables.
We anticipate a rebound in cash conversion over the second half of the fiscal year, as inventory levels normalize. In the second half of FY 2023 we will focus on maintaining a healthy cash generation in line with our commitment to maintaining a strong investment grade credit rating.
Responsible business
Responsible business is a core part of Firmenich's values and a source of trust and differentiation for our customers. We strive to create sustainable value for all our stakeholders today and for the generations to come through our business activities and all along our value chain.
We have continued our efforts to raise the bar in ESG. At the end of the first half of the fiscal year, Firmenich received a CDP Triple "A" rating for the fifth consecutive calendar year, one of only two companies in the world to achieve this. Firmenich also received approval from the Science Based Targets initiative (SBTi) for its net-zero emissions target, making it one of the first companies globally to receive approval from the SBTi.
Firmenich holds a Sustainalytics ESG risk rating of 7.5 points, ranking 51st out of over 15,500 companies rated worldwide, and number 1 in the Chemicals industry. We also have the highest EcoVadis sustainability rating, Platinum, with a score of 88/100, ranking the Group in the top 1% among the 85,000+ companies evaluated worldwide since 2009, and the leader in its industry. In January 2023, we received a new Global EDGE "Move" certification. In addition, we were given the highest EDGE "Lead" certification in Brazil and Mexico for our efforts on diversity, equity and inclusion, the first company in our industry and the seventh in the world to achieve this level.
DSM-Firmenich merger
On 31 May 2022, DSM and Firmenich announced that they have entered into a business combination agreement to establish the leading creation and innovation partner in nutrition, beauty and well-being. Please visit www.creator-innovator.com for additional material on the proposed combination.
Disclaimer
This document and the related results contain forward-looking statements related to Firmenich and its future business and financial performance and future events or developments, including statements regarding: trends; exchange rates; plans, strategies and objectives of management; anticipated production; capital costs and scheduling; operating costs and supply chain issues; provisions and contingent liabilities; tax and regulatory developments. Forward-looking statements can be identified by the use of terminology such as 'intend', 'aim', 'project', 'anticipate', 'estimate', 'plan', 'believe', 'expect', 'may', 'should', 'will', 'continue', 'annualised' or similar words. These statements discuss future expectations concerning the results of operations or financial condition, or provide other forward-looking statements. These forward-looking statements are not guarantees, or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond Firmenich's control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. Readers are cautioned not to put undue reliance on forward-looking statements. Other than in accordance with its legal or regulatory obligations, Firmenich does not undertake to update or revise any forward-looking statement to reflect any changes in events, conditions or circumstances on which any such statement is based.
Non-IFRS measures have not been subject to audit or review and should not be considered as an indication of, or alternative to, an IFRS measure of profitability, financial performance or liquidity. For further information on non-IFRS measures, see the report on alternative performance measures included in Firmenich's half year report for the period ended 31 December 2022.
Nothing in this presentation should be construed as either an offer to sell, or a solicitation of an offer, to buy or sell securities in any jurisdiction, or be treated or relied upon as a recommendation or advice by Firmenich.
Disclosure
The information was submitted for publication, through the contact persons set out below, at 7am CET on 16 February 2023. Further information is available for investors on https://investors.firmenich.com.
About Firmenich
Firmenich, the world's largest privately-owned fragrance and taste company, was founded in Geneva, Switzerland, in 1895, and has been family-owned for 128 years. Firmenich is a business-to-business company specialized in the research, creation, manufacture and sale of perfumes, flavors, and ingredients. Renowned for its excellent research, as well as its leadership in sustainability, Firmenich offers its customers innovation in formulation, a broad palette of ingredients, and proprietary technologies such as biotechnology. Firmenich delivered CHF 4.9bn of sales in the calendar year ended 31 December 2022.
[1] At constant currency
[2] all the components of the polymer wall are readily biodegradable or naturally sourced materials. Natural-origin as defined by ISO 16128
[3] Unless otherwise stated, Revenue growth comparisons are made on an organic basis at constant currency, as defined in the Alternative Performance Measurements section in the Half Year Report, versus the same period in the prior year.
