A 3.6 per cent rise in flavour sales helped the group offset a 1.6 per cent drop in fragrance sales, providing the firm with a considerable 31 per cent lift in net profit from CHF167 million (€108m) for the first six months in 2003, to CHF 220 million (€142m) for the same period in 2004.
The Swiss firm put the marked improvement in performance down to a range of factors, including organic growth through innovation, increased win rate and a broadening of the customer base.
"The margin improvement initiatives announced in January 2004 are well under way and had already a positive impact on half year performance. Major contributors were the improved sourcing and supply chain management, activity based staff reductions in all regions and efficiency gains in all areas," said the Geneva-based maker of flavours for confectionery, dairy, beverages and savoury markets.
With €1.7bn worth of sales in 2003, Givaudan can claim about a 13.5 per cent market share of the world market for flavours and fragrances, followed closely by US competitor International Flavours and Fragrances (IFF) that has a 11.7 per cent slice of the market on sales of €1.5bn. The first half results announced today suggest that the firm is on track to substantially improve results for the full year 2004 compared to 2003.
"Additional positive factors were the stabilising currencies, lower pension charges and the enhanced savoury margins," added the firm in a statement today.
Last month Givaudan identified India and China as key areas for growth. Bangalore-based Givaudan India said it will make substantial investments in the next three years for increasing its market share in the subcontinent and to ramp up exports.
"We are open to invest more in India in product expansion and research and development activities," Givaudan CEO Juerg Witmer reported the India Daily last month. "Though we outsource more from India for our global operations, including raw materials, IT services and audit work, our annual sales here are yet to match our purchases."
According to the news report, the firm said it had pinpointed India and China as key drivers in expanding its global presence and increasing market share to 20-25 per cent from the present 13.5 per cent.
"We believe India and China will be the major consumers of fragrances and flavours, thanks to their potential to emerge as strong economies in the world with higher growth rates than in advanced countries," Witmer said.
A recent report from investment bank Goldman Sachs places the combined growth in Gross Domestic Product (GDP) for China, India, Indonesia, Malaysia, Philippines and Thailand in July this year at 8.4 per cent, but the report predicts that by July next year this figure will have dropped to 7.5 per cent. But these figures are healthy in comparison to overall world GDP growth pitched at 4.9 per cent in July, up from 4.8 per cent in May 2004. The bank estimates that world GDP growth will dip to 4.1 per cent by July 2005.
In June this year Givaudan announced moves to consolidate its European flavour production business, moving production from its Dutch site to two other facilities in Germany and Switzerland.
The flavour compounding production at Barneveld will be transferred to Givaudan's German and Swiss sites in a move designed to "optimise European capacity utilisation".
Givaudan said that it would continue to maintain a strong marketing and sales presence in the Netherlands, as well as its state-of-the-art centre for flavour creation and application for its Dutch and European customers. Barneveld would also remain Givaudan's centre of excellence for flavour ingredient production.
The Dutch transfer follows the decision last year to move flavour production from Milton Keynes in the UK to the German plant in Dortmund, again as part of an efficiency drive.