Givaudan's organic sales top market estimates but tariff paybacks weigh on shares
By Rafal Wojciech Nowak
Givaudan's Q2 Performance and Market Impact
July 23 (Reuters) - Givaudan's second-quarter organic sales beat market estimates on Thursday, but its shares fell around 5% as litigation costs weighed on profit and tariff repayments clouded the fragrance and flavour maker's outlook for the rest of 2026.
Organic Sales Growth and Market Consensus
Organic sales grew 4.3% in the quarter, ahead of a company-compiled consensus of 3.7%, marking the first acceleration in Givaudan's organic growth since late 2024.
Analyst Reactions
The results were "solid but not stellar", which was not enough to sustain the shares' strong recent run, Vontobel analyst Arben Hasanaj told Reuters.
Cost Pressures and Tariff Repayments
Givaudan said it expected input costs to rise by a low single-digit percentage in the second half of the year and would raise prices to offset them. Partially recovered U.S. tariffs will be repaid to customers, weighing on organic sales growth, it added.
CEO Commentary on Raw Material Prices
"We haven't seen any relevant or material impact on raw material prices, because of the coverage that we had," CEO Christian Stammkoetter said during a media call, adding that the overall situation now looked slightly better.
Analyst Concerns for Future Forecasts
However, Bernstein analysts cautioned in a note that market forecasts were likely underestimating the spread between Givaudan's raw material costs and prices this year and into 2027.
Litigation Costs and Profit Impact
Givaudan also booked 103 million Swiss francs ($126 million) in non-recurring costs in the first half, mainly tied to fragrance and flavour litigation, which analyst Victoria Nice from Bernstein said were "not well anticipated".
Net Income Results
As a result, half-year net income fell nearly 20% to 475 million francs, missing a consensus of 554 million francs.
Divisional Performance
Fragrance Division
Givaudan's fragrance division, which creates scents for prestige perfumes and everyday household goods, saw organic growth of 7.1% in the quarter, topping a 5.8% consensus, as strong demand for consumer-goods scents outweighed slower growth in fine fragrance.
Flavours Division
Its flavours division, which makes flavourings for food and drink, roughly met market expectations with 1.5% growth, as a rebound in South Asia, Middle East and Africa was tempered by continued softness in Latin America.
Regional Performance in Latin America
The drag was concentrated in Mexico, Givaudan's largest market in the region, where beverage demand was sluggish, Stammkoetter said.
($1 = 0.8147 Swiss francs)
(Editing by Milla Nissi-Prussak)
