Givaudan is a global leader in the consolidated, high-value-added flavors and fragrances industry, where it has c25% market share (excluding personal care ingredients), with a significant lead to the number two player, Firmenich.
Givaudan has increased its exposure to faster-growing markets and customers thanks to several acquisitions and now generates 15% of sales from these businesses. We see scope for upgrades to earnings thanks to easing raw material prices, cost-containment and the scale effects of
acquisitions, and to cash flow from better working capital management. There could be modest earnings upside from adjacencies such as plant-based meat, which requires more flavoring to make it palatable. While Givaudan’s valuation is high relative to other chemicals stocks, it reflects the stock’s earnings and cash flow visibility. Risks include oil price, interest rates and currency movements.