UPDATE 3-Givaudan to hike prices as materials costs jump

* Q1 sales rise 3.1 pct in local currencies to 1.01 bln SFR

* Forecast was for 1.04 billion Swiss francs

* Confirms 2011 growth and margin outlook

* Shares down 0.1 pct, underperform peers
(Adds analyst comment, shares)

By Silke Koltrowitz

ZURICH, April 8 (Reuters) – Givaudan (GIVN.VX: Quote, Profile, Research), the world’s
biggest fragrance and flavour maker, will push through price
increases in the next few months to help it pass on high raw
material costs to customers and hit its 2011 growth target.

The Swiss company said on Friday the price hikes would show
their full impact in the second half of the year, after its
first-quarter sales came in at the low end of expectations.

Givaudan, which makes flavours to improve the taste of
chicken and cheese and fragrances for Dior and Prada perfumes,
is grappling with rising input costs, the strong Swiss franc and
a tough comparison with year-ago numbers.

Shares in the group, which have already lost more than 8
percent this year, slipped 0.1 percent at 0832 GMT, lagging a
0.8 percent higher STOXX Europe 600 Chemicals index (.SX4P: Quote, Profile, Research).
German peer Symrise’s (SY1G.DE: Quote, Profile, Research) stock was up 1.7 percent.

“As expected growth in the first quarter slowed down in both
divisions and this will continue in the second quarter. Rising
input costs will have an impact on profitability in the first
half,” Vontobel analyst Claudia Lenz said.

Givaudan shares have underperformed those of Symrise and
American International Flavors & Fragrances (IFF.N: Quote, Profile, Research) this year,
as investors worried about currency pressure caused by the
appreciation of the Swiss franc.

They trade at around 14 times estimated 2012 earnings, at a
discount to IFF at about 15 times but at a premium to Symrise at
13 times.

Givaudan said in February it was expecting a strong increase
in raw material costs in 2011 and would raise prices to offset
the impact.

The group reiterated on Friday it was aiming to raise
organic sales by 4.5-5.5 percent each year over the midterm.
Vontobel’s Lenz said she expected growth at the lower end of
this outlook this year.

STRONG SWISS FRANC HURTS

Givaudan’s first-quarter sales rose 3.1 percent in local
currencies but fell 5.1 percent in Swiss francs to 1.01 billion
Swiss francs ($1.10 billion).

“The currency impact was more negative than expected,” Lenz
said.

Fine fragrances sales in North America and Europe dipped as
retailers restocked fewer perfumes than last year, but demand
for its savoury and confectionary flavours in Asia Pacific was
particularly strong, Givaudan said.

Consumer product sales in fragrances were another weak
point, Kepler Capital Markets analyst Jon Cox said. “The company
didn’t, however, have any of its price increases in Q1 which
will come from Q2 and comparables were tough.”

(Editing by Erica Billingham)

UPDATE 3-Givaudan to hike prices as materials costs jump