Symrise continued its profitable growth trajectory in the first nine months of the year, achieving organic sales growth of 11.1 %. Considering portfolio and exchange rate effects, Group revenue rose to EUR 3,824 million in the first nine months (9M 2023: EUR 3,610 million), a plus of 5.9 % compared to the year-ago period. Both segments contributed to the positive development and increased sales in a global economic environment that remained challenging. In the third quarter, overall sales increased organically by 10.2 %. Despite negative exchange rate effects of 4.0 %, sales grew by 5.2 % in the reporting currency. Against the backdrop of robust organic growth, Symrise has specified its organic growth target, sales expected to come in at around 7 %.
Jean-Yves Parisot, CEO of Symrise AG: “Symrise was able to seamlessly continue the positive business development of the past months in the third quarter. Despite the current volatile market environment due to geopolitical tensions and continued inflation pressure, we are confident for the rest of the year and expect robust demand. Our diversified portfolio and broad, international footprint will continue to help us realise our growth potential and create sustainable value this year. We are firmly convinced that we have set the right course for the future.”
Sales development by region
The strongest organic growth was recorded in the Latin America region with 27.4 %, followed by the Asia/Pacific region with 11.2 % and EAME (Europe, Africa, Middle East) with 11.1 %. The main growth drivers were the Food & Beverage, Fragrance, Aroma Molecules and Pet Food business units. The North America region achieved organic growth of 2.3 %, driven primarily by the Food & Beverage and Aroma Molecules business units.
High growth in food, beverages and pet food
The Taste, Nutrition & Health segment increased sales organically by 10.4 % in the first nine months of the current fiscal year. In the third quarter, organic growth was 11.3 %. Taking into account portfolio and currency effects, the segment’s revenue rose to EUR 2,349 million in the first nine months (9M 2023: EUR 2,267 million). The portfolio effect from the sale of the beverage trading business in the UK within the Food & Beverage business unit had a negative impact of EUR 27 million on sales development.
The Food & Beverage division achieved double-digit organic growth in percentage terms. Strong growth impulses came from the application areas for sweet and savory products and beverages. All four regions, especially the EAME region, achieved high growth. The Naturals application area increased its revenues, especially in the North America and EAME regions.
The Pet Food division also achieved double-digit organic growth in percentage terms in the first nine months. Sales development was particularly dynamic in the Asia/Pacific and Latin America regions, with double-digit organic growth.
Sales development in the Aqua Feed business unit recorded declining organic growth. As part of the further portfolio streamlining with a focus on high-margin growth areas, Symrise intends to sell the business.
The probiotics business, which includes the majority stake in the listed company Probi AB, Lund, Sweden, generated slight growth, driven by the EAME region.
Strong sales growth in Consumer Fragrance and significant recovery in Aroma Molecules
The Scent & Care segment, which manages the fragrances, perfumery applications and cosmetic active ingredients business, achieved organic sales growth of 12.2 % in the first nine months and 8.4 % in the third quarter respectively. Taking into account portfolio and currency effects, revenue for the first nine months amounted to EUR 1,475 million (9M 2023: EUR 1,343 million).
The Fragrance division increased its sales organically in the double-digit percentage range in the first nine months. In particular, the Consumer Fragrance application area achieved double-digit percentage growth. The EAME, Asia/Pacific and Latin America regions in particular experienced very high market dynamics. The Fine Perfumery application area also continued its very positive development and achieved high single-digit percentage organic growth. Here, the Latin America and Asia/Pacific regions recorded good growth. The Oral Care application area achieved single-digit percentage organic growth, with good growth especially in the North America and Asia/Pacific regions.
Sales in the Aroma Molecules division recovered significantly in the first nine months of the current year. While the market environment continues to prove challenging, the resumption of production in Colonels Island, USA has resulted in a significant year-on-year increase in revenue. High double-digit growth figures were achieved in all regions.
Sales in the Cosmetic Ingredients division continued to develop strongly with high single-digit percentage organic growth. Revenues increased significantly in the EAME, Asia/Pacific and Latin America regions. Only the North America region showed just a slight year-on-year growth. The application areas for micro-protection and actives and botanicals also recorded very strong growth impulses.
Symrise specifies growth target for 2024
Based on the good business performance in the first nine months, Symrise is specifying its sales target for the full year 2024. The Group is now aiming for organic sales growth of around 7 %. The Group’s long-term organic growth expectation of 5 % to 7 % (CAGR) remains unchanged. The long-term EBITDA margin is expected to be in the range of 20 % to 23 %.
After record order intake in the first half of 2022, the strong demand for Krones products and services continued unabated in the third quarter. Order intake between July and September 2022, at EUR 1,493.3 million, exceeded the already good prior-year figure of EUR 1,148.3 million by 30.0 %. In total over the first three quarters of 2022, the contract value of orders increased by 44.1%, from EUR 3,192.6 million a year earlier to EUR 4,599.7 million. At EUR 3,449.0 million as of the end of September 2022, the order backlog at Krones was up 95.9 % on the previous year (EUR 1,760.9 million). Compared to the beginning of 2022, the increase is EUR 1.56 billion, or 82.2 %.
Krones held a course of stable revenue growth in the third quarter. Revenue from July to September was up 14.7 % to EUR 1,058.9 million. In the first nine months of 2022, revenue went up by 15.2 % year on year, from EUR 2,643.0 million to EUR 3,043.7 million. Thanks to its great flexibility, Krones managed well with the resource shortages and international supply chain problems during the reporting period. This enabled the company to deliver strong revenue growth.
Krones improves profitability as forecast
The company was able to maintain satisfactory but, due to material shortages, not full capacity utilisation in the first three quarters of 2022. Due to the extensive efficiency improvement measures and the initial effects of the price adjustments, profitability nevertheless improved as planned in the reporting period. Earnings before interest, taxes, depreciation and amortisation (EBITDA) climbed by 27.0 % in the first three quarters from EUR 212.6 million to EUR 270.1 million. The EBITDA margin rose to 8.9 % (previous year: 8.0 %). Earnings before taxes (EBT) went up by 49.2 % to EUR 176.6 million (previous year: EUR 118.4 million). The EBT margin consequently rose to 5.8 % (previous year: 4.5 %). On the bottom line, Krones generated consolidated net income of EUR 128.3 million in the first three quarters of 2022, an increase of 48.2 % (previous year: EUR 86.6 million). This corresponds to earnings per share of EUR 4.06 (previous year: EUR 2.74).
Krones’ EBITDA of EUR 95.0 million in the third quarter was 26.8 % higher than in the previous year (EUR 74.9 million). The EBITDA margin rose from 8.1 % to 9.0 %. EBT improved by 48.5 % to EUR 63.4 million (previous year: EUR 42.7 million). At EUR 45.1 million, consolidated net income in the third quarter was 51.9 % higher than in the previous year (EUR 29.7 million). This made for earnings per share of EUR 1.43 (previous year: EUR 0.94).
Krones’ net cash at EUR 440.9 million as of the end of September 2022
Krones significantly improved working capital and free cash flow in the first three quarters of 2022. The ratio of average working capital for the past four quarters to revenue came to 20.5 % (previous year: 26.2 %). The decrease reflects the strong revenue growth and rising advance payments from customers due to the large order intake. Free cash flow in the first nine months of 2022 amounted to EUR 132.3 million, an increase of EUR 24.8 million on the already high prior-year figure (EUR 107.5 million). Krones’ net cash – cash and cash equivalents less bank debt – amounted to EUR 440.9 million at the end of September 2022 (previous year: EUR 283.4 million). In addition, Krones had available just under EUR 1 billion in free lines of credit as of 30 September 2022. Krones improved ROCE (return on capital employed) to 12.4 % in the first three quarters of 2022 (previous year: 10.1 %).
Krones has raised its growth guidance for revenue in the full year 2022
Krones faced many challenges in the first three quarters of 2022 that continue to apply. Uncertainties and risks include material shortages and problems in global supply chains, rising material and energy procurement prices, geopolitical risks in Europe and other parts of the world, and also strong inflation in many countries. It is also uncertain how the Covid-19 pandemic and the war in Ukraine will continue to play out and whether industry can be supplied with sufficient energy.
Krones has managed well with all challenges so far and remains fundamentally optimistic. Due to the continued very strong demand for Krones products and services, as well as good management of scarce resources, the company expects to maintain satisfactory production capacity utilisation in the fourth quarter of 2022. On 19 October, on the basis of current planning, Krones therefore raised its guidance for revenue growth in the full year 2022 to between 10 % and 12 % (previously 5 % to 8 %).
The guidance for the other two financial targets remains unchanged. This means the company continues to expect an EBITDA margin of 8 % to 9 % and ROCE of 10 % to 12 % in 2022. The Executive Board is confident of reaching the upper end of the target range for both figures.
These forecasts are subject to the reservation that the war in Ukraine does not further escalate, the coronavirus situation does not worsen and there are no significant energy shortages.
The cost of plastics, aluminium, paper and liquids materials used in flexible packaging reached new, record levels in the first quarter of 2022, maintaining the strong upward surge in prices seen throughout 2021, according to Flexible Packaging Europe (FPE). Continued pressure from soaring energy costs, as well as other external factors, means the dramatic increases seen in the last half of 2021 have now been exceeded.
In particular the cost of 20micron BOPP film shot up 45 % during January to March 2022 and has now doubled in price since the first quarter of 2021. Thin aluminium converter foil also jumped by 67 % in the same three months and is now 75 % higher than the end of 2020. Elsewhere, 12micron PET added 47 % in the same period to stand 50 % higher than just over a year ago, while 15m micron BOPA film added 33 %, marking a 44 % increase in 15 months.
LDPE and HDPE prices are still well above the price levels seen at the end of 2020, being 75 % and 54 % more. Both are still well above the price levels seen at the end of 2020, being 75 % and 50+ % more. All figures have been complied by Wood Mackenzie and ICIS.
Commenting on the figures, David Buckby, Senior Analyst at Wood Mackenzie said, “Substrate prices across the board continued to rise sharply in Q1, driven primarily, in many cases, by energy surcharges. Limited availability of materials also propped up prices, made worse by ongoing global logistics challenges. The high cost and unpredictability of offshore sourcing means that European producers were generally busy, with some fully booked and not accepting new orders.”
“Lead times for aluminium foil in Q1 were as long as five months compared to two months previously. For paper, they were often two to three months, up from four to six weeks. The extent of price increases from supplier to supplier depended heavily on the scope of previous hikes – timings do vary. Some producers which pushed through substantial energy surcharges and price rises in Q4 pushed for only moderate hikes or even rollovers in Q1,” he added.
“Russia’s invasion of Ukraine added further uncertainty to an already highly clouded outlook,” Buckby believes.
FPE sees continued strong demand for all flexible materials as growth indices for the markets its members serve all remain positive. However there has been a general slowdown in the pace of growth, which may take some pressure off already stretched supply shortages of raw materials and ancillary products, such as adhesives and inks. Logistics and utilities pricing increases had and will continue to have a large effect on conversion costs to flexibles packaging converters. After a brief pause oil prices are now increasing again, so this may weigh on any respite from continued flexible material price hikes.
Guido Aufdemkamp, FPE’s Executive Director thinks it is difficult to forecast the direction of the market in current circumstances. “Growth in demand in Europe for flexible packaging is almost certain. While the price increases could have an impact on the levels of demand this is unlikely as non-flexible packaging applications are faced with higher absolute increases per pack as more material is used. Add the continuing supply chain disruption and major energy issues to the equation and the outlook is uncertain. The conflict in Ukraine and the economic consequences of it across Europe were not something we could predict or anticipate. However flexible packaging producers have proved resilient in the past, most recently with the pandemic, so we are confident the sector will continue to be able to meet demand for its products.”
