THE NATURE OF OUR BUSINESS – STABLE GROWTH - Symrise

The Company’s Performance in 2008 – A Comparison between
the Actual and Forecast Course of Business
The forecast delivered on March 5, 2008 at the presentation of
the 2007 business results was for organic, currency-adjusted sales
growth of 5% to 6% (excluding acquisitions) and an increase in the
EBITDA margin to 22% for fiscal 2008, the year having got off to a
good start.
However, in mid-2008 we had to revise our sales growth and
EBITDA margin forecasts downwards. The main reasons for this
were the rapidly weakening business environment, an unforeseeably
high increase in raw materials prices and energy costs, and
the slight margin dilution due to the acquisition of Chr. Hansen
Flavors. The adjusted forecast issued at the end of July predicted
sales growth at local currency (including acquisitions) of 6% to 7%,
and an EBITDA margin of approximately 21%.
In the course of the third quarter, the economic situation worsened
further. At the same time, our negotiations with customers on
price increases lasted longer than anticipated. In addition, our customers
grew increasingly cautious over ordering their materials,
making our business more difficult to plan and predict. In the end,
we had to adjust our earnings forecast once again. At the end of
October we announced an EBITDA margin of approximately 20%.
We were able to maintain our sales growth forecast (currencyadjusted),
including acquisitions, of 6% - 7%.
Raw materials prices rose relentlessly until the end of November
2008, with price increases first starting to slow in the course of
December. In the fourth quarter, moreover, customers transferred
orders from 2008 to 2009 to minimize working capital. The positive
effects of our price increases only became evident in the
fourth quarter and failed to offset the significantly higher cost of
sales. Against this backdrop, we failed to meet our target of achieving
currency-adjusted EBITA on a par with the previous year. At
current rates EBITA fell by 5%. The EBITDA margin reached 19.9%,
within our target range of around 20%.
ACHIEVEMENT OF GOALS
Sales growth (in local currencies)
EBITDA margin
EBITA
Adjusted EPS
Free Cash Flow
The fact that we did not meet our EBITA target had a negative impact
on adjusted earnings per share (EPS). We were not able to increase
adjusted EPS as forecast; instead they remained at the
previous year’s level of € 1.02. However, we see this as an indication
of the robustness of our business amid the steadily worsening
business environment in 2008.
4. RESULTS OF OPERATIONS
Sales
Symrise achieved total sales of € 1,319.9 million in 2008. On a
local currency basis, this represents an increase of 6.5%. Based on
actual rates, sales rose by € 45.4 million (3.6%) compared to 2007.
Sales excluding the acquisitions discussed above climbed in local
currencies by 3.5% (0.8% at actual rates).
The sales performance of Scent & Care in fiscal 2008 was mixed.
While Life Essentials, Household, Aroma Molecules and Mint performed
according to plan, the “luxury segments” Fine Fragrances
and Personal Care had to contend with demand problems caused
by the global economic situation. In 2008, Scent & Care generated
sales of € 671.8 million. As a result, including the acquisitions
Intercontinental Fragrances and Manheimer Fragrances,
sales reached the previous year’s mark. At local exchange rates
Scent & Care’s sales were up by 3%. Excluding Intercontinental
Fragrances and Manheimer Fragrances, sales fell slightly by 0.7%
to € 666.8 million (+ 2.2% on a local currency basis).
Including Chr. Hansen Flavors, Flavor & Nutrition recorded sales of
€ 648.1 million in 2008, an increase of 7.4% (10.4% at local rates).
Excluding Chr. Hansen Flavors, sales rose by 2.4% to € 617.5 million
(5.0% on a local currency basis). After the acquisition in April,
Chr. Hansen flavors posted sales of € 30.6 million.
In fiscal 2008, sales in the emerging countries rose 8% (on a local
currency basis) compared to the previous year, thus contributing
to the overall sales growth.
Goal in 2008 (as of October 28, 2008)
6% - 7% (incl. acquisitions)
Approximately 20%
EBITA at previous year’s level in LC
Currency-adjusted growth of 4% - 6%
9% -10% of Sales
Achievement of goals in 2008
6.5%
19.9%
- 5%
0%
9.3%
68 Annual Report 2008 Symrise AG