Morningstar | Strong Organic Growth Continues for Symrise in 4Q; 2019 Guidance In-Line
Wide-moat Symrise reported another quarter of strong, broad-based growth. Fourth-quarter organic growth was 8.7%, led by double-digit growth in nutrition. For the full year 2018 organic growth was 8.8% and the EBITDA margin was 20%, in line with guidance that was raised twice during the year and slightly ahead of our expectations. Guidance for 2019 is 5%-7% organic growth with 20% EBITDA margins, which is broadly in line with our expectations, although we think margins have upside. In any case, we don’t expect to materially change our EUR 70 fair value estimate. At current levels, shares are moderately overvalued.While Symrise stated the raw material market remains tight, we think raw materials will likely stabilize in 2019, if not decline slightly in the latter part of the year. We don’t expect the Probi destocking issue to be repeated and some progress should be made with the Cobell acquisition. As a result, the 20% EBITDA margin target is likely a conservative estimate. Symrise typically guides for a 20% EBITDA margin every year.
In the segments, fourth-quarter organic growth was 8.1%, 7.2%, and 12.6% in scent and care, flavor, and nutrition, respectively. Asia-Pacific was the strongest region with organic sales growth of 10.9% in the fourth quarter. Symrise’s strategy of moving into adjacent business areas continues to have positive results. For the full year, cosmetic ingredients and pet food reported double-digit growth.
Symrise AG develops, produces, and sells fragrances and flavors as well as active ingredients for the cosmetics industry. Co. operates in two main business segments: The Scent & Care segment, which develops, produces and sells fragrances, cosmetic ingredients, aroma molecules and mint aromas and also develops specific application processes for such substances; and The Flavor & Nutrition segment, which develops, produces and sells flavors that are used by customers in the production of food products (savory and sweet food products as well as dairy products) and beverages.
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