THE NATURE OF OUR BUSINESS – STABLE GROWTH - Symrise

As part of our strategy, we pursued acquisitions in 2008 that significantly
improved the positions of both divisions in the key US
market.
At the beginning of March we announced the acquisition of the
flavor business of Denmark-based Chr. Hansen, which was successfully
concluded on April 25, 2008. The purchase price of the
company, which posted sales in 2007 of $ 70 million (€ 51 million),
was $ 110 million (€ 72 million). The flavor business acquired
from Chr. Hansen includes the areas of Seasonings, Sweet Flavors,
Savory Flavors and Dairy Flavors. The purchase provided us
with additional production capacity and new technologies, which
have increased our competitiveness in the North American market.
In addition, we were able to expand our marketing organization
and gained access to a new customer base that makes an excellent
addition to Symrise’s existing business.
In the Scent & Care division, we announced the acquisition of Intercontinental
Fragrances at the end of September, which had
been successfully concluded on September 3, 2008. On November
6, 2008, we also successfully completed the acquisition of
Manheimer Fragrances. Symrise paid a total of $ 92 million (€ 65
million) for both transactions. In 2007, Intercontinental Fragrances
had sales of $ 16 million (€ 12 million), with Manheimer Fragrances
registering sales of $ 33 million (€ 25 million).
With these acquisitions, Symrise became one of the leading scent
providers for air care products in the US. The North American market
for air care products accounts for over $ 300 million in sales
and thus makes up 10% of the total fragrance market in the US. In
addition, Symrise acquired a number of attractive new customers
and will take advantage of the newly won expertise to secure its
position in the global air care market. For example, we are planning
to open a global air care center in the US in 2009.
Our sales were negatively impacted by various factors over the
course of 2008: the financial and economic crisis, which worsened
in the second half of the year; changes in the ordering habits
of many customers; and high prices for raw materials, which remained
elevated throughout the year.
The financial and economic crisis led to a recession in established
markets and to a slowdown in growth in emerging markets.
Although these developments had a negative impact on the entire
F&F market, they did not fundamentally alter the industry’s basic robustness.
They did, however, directly influence the ordering habits
of our customers in the second half of the year. In order to maximize
cash flow at the end of the year and to minimize working capital,
customers tried to reduce inventories in November and December
and to delay orders planned for 2008 until after the new year. This
led to a temporary, atypical gap between demand and orders, which
slowed our sales growth in the second half of the year. Excluding acquisitions,
our currency-adjusted sales growth fell from 5.2% in the
first half of the year to 1.6% in the second half.
Despite the general economic downturn, prices for raw materials
rose continually in 2008. As the increases began to slow in December,
prices were still more than 5% higher, on average, than in
December 2007. High prices for raw materials led to higher salesrelated
costs over the entire year and had a direct, negative impact
on our profit margins. Given the economic crisis, putting our price
increases into place was more difficult than expected. They only
had a positive effect later in the year and were not able to make
up for the increase in sales-related costs. Against this background,
our EBITA fell in the second half of the year by 15%, at local currency.
For the entire year, EBITA fell 5% year-on-year at local currency.
Despite the negative impacts, our EBITA margin remained at
the high level of 16.8% for the entire year.
11. OUTLOOK AND OPPORTUNITIES ASSESSMENT
Underlying conditions and future
development of the Symrise Group
At the start of 2009, the world economy is characterized by several
negative factors: volatile stock and financial markets, fluctuations
in currencies and the price of raw materials, a shortage of liquidity
and a negative consumer climate worldwide. Markets in the emerging
countries – the strategic growth drivers in our business – look
set to grow faster in 2009 than the established markets, albeit not
as rapidly as in recent years. Against this background, we anticipate
that the global F&F market will not grow in 2009.
Despite the unfavorable business environment, we consider our
core business to be as stable and robust as before. We see our
relatively good results in 2008, which was a difficult year, as confirmation
of our strategy. And we view the economic crisis as an
incentive to further fine-tune and pursue our strategy. Various
different factors have paved the way for a further increase in our
competitiveness:
› the focus on segments with the best growth prospects
› market-driven research worldwide
› an innovative product portfolio, almost 90% of which is
based on satisfying basic needs
88 Annual Report 2008 Symrise AG