THE NATURE OF OUR BUSINESS – STABLE GROWTH - Symrise

8. OTHER FACTORS RELEVANT TO RESULTS/
NON-FINANCIAL PERFORMANCE INDICATORS
Procurement
We use approximately 10,000 natural and synthetic raw materials
from all over the world to manufacture our products. Among the
natural raw materials are plants as well as plant and fruit extracts.
Organic chemicals are among the synthetic products we use.
When we purchase raw materials quality, availability and price are
decisive factors. To optimize our supply chain, we organize purchasing
centrally. Global contracts are negotiated for the most important
raw materials. Approximately 50% of our raw materials
come from Europe. We buy the remainder in other parts of the
world, basing our decisions on price, quality, and production site.
Local production sites outside Europe satisfy part of their requirements
from local raw materials markets. They also purchase
intermediate products from the main production facilities in
Germany.
Our raw materials are subject to price fluctuations, and we adopt
various approaches to minimize price risks. We have fixed contracts
over a maximum one-year period for a large part of our raw
materials. In addition, we use new raw materials markets, for example
India, where price and quality are offering new opportunities
to reduce our production costs and thus increase our profitability
in the long run. We also utilize new technologies, processes, and
recipes to reduce the number of raw materials used.
Raw materials prices rose constantly in 2008. In November, quotations
were 6% higher than a year previously. Despite a slight drop
in December, prices were still 5% higher year-on-year. We enjoyed
currency-related advantages in the first half of 2008, because
about half of our products are manufactured in the euro zone and
many raw materials were purchased during that period in the
weaker US dollar. In the second half of the year, however, this
situation reversed when the US dollar gained ground against the
euro.
In recent months many raw materials prices have eased somewhat.
However, in some areas, such as the production of citral,
which is needed to manufacture fragrance compositions, the cost
situation remains tense. At this stage we do not expect average
raw materials prices to fall significantly in 2009. In our planning for
the year we are therefore penciling in further price increases,
although we do not expect them to be as steep as in 2008.
Annual Report 2008 Symrise AG 79
Operations/Supply Chain
The operational areas integrated into the divisions are responsible
for production and the supply chain. The purpose of integrating
operations into the divisions is to achieve closer customer
proximity and to maximize the responsible business units’ scope
for action. With our innovative Symchronize approach, we closely
cooperate with individual customers to realize new potential in the
value chain for both our customers and ourselves. Symchronize
seeks to optimize the supply chain by taking an integrated view of
the entire value chain, from raw material procurement to successful
delivery of the end product. Total Productive Maintenance
(TPM) forms part of Symchronize. TPM ensures continuous control
of the results achieved by measuring and comparing performances.
A scorecard system records performance in all relevant
areas each month. The aim is to increase productivity continuously
and measurably by quickly recognizing and remedying problems.
Symrise operates production facilities at numerous sites worldwide.
The largest capacities are in Germany at our Holzminden,
Nördlingen, and Braunschweig sites, as well as in Teterboro (USA).
Holzminden and Teterboro also have major chemical production
plants available. Additionally, the Group maintains large production
facilities in Singapore, Chennai (India), Shanghai (China),
Cuautitlán lzcalli (Mexico) and São Paulo (Brazil). The other sites
are focused on sales activities and have either relatively small
mixed operations or no production facilities at all. As of December
31, 2008, Symrise employed more than 2,100 manufacturing and
technology staff worldwide.
The main focus of operations was successful integration of the
companies we acquired in 2008 in the US. The Flavor & Nutrition
division acquired Chr. Hansen Flavors. In July, Chr. Hansen’s production
facilities in Mahwah (New Jersey) were integrated into our
production operations in Teterboro (New Jersey). In August, we introduced
SAP at the site acquired in Elyria (Ohio). This factory is
now fully operative and linked to the Symrise production facilities.
The integration of Chr. Hansen’s sites was completed by the end
of the year, as scheduled.
Scent & Care acquired Intercontinental Fragrances (Houston,
Texas) in September and Manheimer Fragrances (Teterboro, New
Jersey) in November. Intercontinental Fragrances’ site in Texas is
being integrated into our operations network. The acquisition of
Manheimer Fragrances did not involve any property, plant and
equipment. We acquired recipes and know-how, which are being
transferred to our Scent & Care division sites in the US.
Group Management
Report