Fostering a culture of excellence
I am pleased to report we finished the fourth year of our 2020 strategy with a strong performance. I am proud of all we achieved, and would like to thank you all for your commitment and investment in Givaudan.
In 2019, we delivered solid topline growth and free cash flow generation, in line with our 2020 financial targets. On the basis of Givaudan’s strong performance in 2019, and its continued solid financial position, the Board of Directors will propose an increase in the dividend to CHF 62.00 at the Annual General Meeting on 25 March 2020. This is the nineteenth increase since our listing on the Swiss stock exchange.
Overall, we continued to deliver strong financial results and long-term value creation for all our stakeholders. Our strategic focus areas, driven by global mega trends and changing consumer preferences, led us to further evolve our business through acquisitions and investments for the future. The addition of several companies enhanced our ability to deliver complete solutions, extend our reach with local and regional customers, and grow opportunities in attractive adjacent spaces. Investing in our business for the long term, we also continued to expand our global presence with a number of new facilities and state-of-the-art innovation centres, ensuring close proximity to our customers and consumers.
In 2020, while we see an unsettled external economic and political landscape, the outlook for our business remains strong. Our strategic focus areas remain very relevant to shifting global trends, and we are positioned to act quickly to deliver for our customers. High growth markets will remain a key strategic focus area. Our expanded portfolio will continue to allow us to develop new and differentiated solutions for our customers. Local and regional customers will also continue to be of strategic importance, requiring us to adapt our offering and processes in more customised ways. And the role of biotechnology and digital technologies present exciting opportunities to innovate in our creation process, developing a broader and future-proof palette of ingredients to our customers.
We are proud to be Givaudan and have sharpened our understanding of why we are working for Givaudan – ‘Creating for happier, healthier lives with love for nature. Let’s imagine together’ very well articulates why we do what we do. It represents the strong commitment we make to our customers, our people, and the planet to go beyond financial targets, and make a meaningful contribution to address the challenges faced by society. It sets our intention for the years to come, sits at the heart of our strategy going forward, and is lived by our employees day-to-day.
The climate crisis is one area where businesses need to be stronger in their actions to avoid the potential disruption to economies, society, people and planet. We’ve set ourselves the highest bar of becoming a climate-positive business before 2050. This is bold in scope and scale, and will require new ways of operating and interacting with our stakeholders. We have a long heritage of delivering excellence and I am pleased to report that we have again been recognised by CDP, the non-profit global environmental disclosure platform, which has awarded us an ‘A score’ for climate change. In 2019, for the first time, Givaudan was ranked in the list of top 25 sustainable companies in the SXI Switzerland Sustainability 25 Index®, recognising our sustainability endeavours.
We continue to focus our efforts on succession planning. With an excellent talent and succession programme in place for a number of years, we have a strong group of senior leaders for today and for the future. We have an experienced team in place at the Board level, and at all levels we continue to ensure we have the necessary competencies and the right blend of expertise and experience. In 2021, three of our long-standing Board members will stand down from their positions. To ensure continuity we will propose two new members to stand for election at the Annual General Meeting in 2020 and an additional member in 2021.
We are well positioned for the future and I have every confidence that Givaudan will continue on its successful path. We will continue to create further shareholder value through profitable, responsible growth, guided by the purpose of our Company.
I’d like to express my thanks and gratitude to my fellow members of the Board of Directors, the Executive Committee and all our employees worldwide for their hard work and dedication. It is their contribution and passion that makes Givaudan a unique place to work.
Finally, I would like to thank our shareholders for their trust and continuing support.
Chief Executive Officer’s review Delivering with excellence
We reached important crossroads in 2019. Four years into our 2020 strategy cycle, we delivered another year of strong performance while also preparing for our next chapter, powered by our newly defined Company purpose and with a significantly expanded portfolio from recently acquired companies.
Strong financial performance
With our customers at the heart of everything we do and navigating a changing external environment, we were able to deliver a strong performance in 2019. We delivered sales of CHF 6,203 million, an increase of 5.8% on a like for like basis, and 12.2% in Swiss francs, as well as a free cash flow of 12.7% of sales, both in line with our 2020 financial targets. Our growth was well balanced between our Flavour and Fragrance divisions driven by the strong operational progress we made across all areas of the strategic pillars of our 2020 strategy. This performance recognises the value we bring to our customers, the strength of our business, and the hard work and dedication of all our employees.
Thriving in a changing world
The global megatrends and rapidly changing consumer behaviours that have played out over the last few years continued to bring new opportunities to our business.
We saw increasing disruption stemming from consumers seeking natural, organic and clean products, digitalisation, and the need to take bolder actions on the climate crisis. Our business has continued to respond effectively, developing both internal capabilities but also seeking new partnerships and joining forces with companies to provide a stronger offer for our customers. We continued to successfully implement our Givaudan Business Solutions organisation, which integrates a range of core business solutions to improve our agility and reduce the complexity of our internal processes to focus entirely on delivering a superior customer experience.
While our Company has grown and expanded, responding to the numerous opportunities available, many constants remain. At the core of our business is our relationship with our customers. Providing them with the creative and innovative solutions that are loved by consumers is what motivates us every day. Our people also drive our success. Being a ‘great place to work’ is our ambition, and we continue to increase our efforts to engage our people, investing in their development and creating an inclusive culture where all our people grow and succeed. Our latest Employee Engagement Survey showed a strong and improving overall score, above external benchmarks.
I would like to share with you some examples of how our Company has continued to thrive in a changing world.
The changing shape of our Company
Our Company continued to grow in size and scope as we expanded our portfolio through acquisitions. We welcomed the addition of Golden Frog, drom fragrances, Albert Vieille, Fragrance Oils and the cosmetics business of AMSilk GmbH to the Givaudan Group. We announced our intention to acquire Ungerer and the cosmetics business of Indena. Since 2014, we have made 15 acquisitions which represent an additional CHF 1.5 billion of annualised sales. With each of these acquisitions we are not only combining our expertise and product portfolios, but also enriching and evolving our culture. Our integration approach is to preserve and enhance the strengths of these acquired companies and incorporate their values into our DNA.
We continued to strengthen our market-leading position in Naturals, completing the acquisition of Golden Frog, a Vietnamese flavour company. This builds on the other acquisitions we have made in recent years to provide customers with a broader range of flavour and taste solutions that match consumer demands for clean label, organic and natural ingredients.
In our Fragrance Division, we acquired companies that support our strategic ambitions with local and regional customers, health and wellness and vertical integrations. Founded in 1911, drom has a long heritage in fragrance creation with capabilities in many parts of the world serving local and regional customers. We also acquired Fragrance Oils, a leading UK-based manufacturer and marketer of innovative speciality fragrances for fine fragrances, personal and home care applications. This acquisition also expands our capabilities to serve local and regional customers.
We acquired Albert Vieille, a French company specialised in natural ingredients used in the fragrance and aromatherapy markets. For our Active Beauty business we acquired the cosmetics business of AMSilk, which offers an expanded portfolio of natural and biosourced products supported by a strong research and development biotechnology platform.
We continued to build our presence in high growth markets, allowing us to be even closer to our customers. In 2019, we opened our newest Fragrance encapsulation facility in Singapore, a Flavours production facility in Pune, a Flavours technical and commercial centre in Casablanca and an extension to our Nantong production facility.
Innovating to stay relevant
Building on our 250 years’ pioneering heritage, our new flagship Zurich Innovation Centre is the latest example of Givaudan’s strong innovation culture. As the newest addition to our large network of research and creation centres, it will act as a key enabler to deliver breakthrough science and technology solutions for our customers while tackling the industry’s most pressing challenges. With over 300 employees, the centre provides an inspiring space designed for co-creation, collaboration and innovation to work in partnership with our customers, start-ups and universities.
Providing new, innovative solutions for our customers is critical to maintain our competitive advantage. In 2019, we launched Scentaurus®, a family of fragrance precursors to expand the palette of ingredients available for our perfumers; FiveCarbon Path™, a sustainability vision to drive all new molecule developments in perfumery; and Ambrofix, a biotechnology approach for the most widely used biodegradable fragrance ingredient. In Active Beauty, we launched Sensityl™, an active cosmetic ingredient that fuses nature and scientific expertise to offer consumers dual benefits on beauty and well-being. Playing our role to develop the future of food, we explored new culinary concepts for meat and plant proteins during Givaudan’s Chef’s Council 2019, and announced a breakthrough fat encapsulation technology for plant protein.
Driving digital innovation saw us launch ‘Carto’, an AI-powered tool that reinvents the way perfumers create. Bringing together science and technology in the creation process, the tool allows perfumers to focus on what they do best: crafting and inspiring new creations. It efficiently brings to life their ideas, inspirations and creative concepts while removing repetitive tasks.
Taking our sustainability ambition to the highest level
We recognise strong action is needed to mitigate the most damaging effects of climate change. We joined the global movement of leading companies committed to set 1.5°C sciencebased emissions reduction targets aligned with a net-zero future. Signing the UN Pledge is a milestone on Givaudan’s path to reaching its ambition of becoming climate-positive before 2050. We’ve gone to the highest level by aligning our GHG emission targets to limit global warming at 1.5°C above pre-industrial levels, the most ambitious goal of the Paris Agreement. This builds on our other measures such as converting our entire electricity supply to fully renewable sources by 2025 and finding ways to be more energy efficient across our operations.
Our sustainability commitments continued to be externally recognised. In the 2019 EcoVadis survey we came in the top 1% of the 55,000 participating companies, earning a gold rating for the fifth year in a row. CDP, a non-profit global environmental disclosure platform, awarded us an A for climate change. This was the fifth consecutive year on the leadership level for the Company, which has been disclosing GHG emissions through its participation in CDP since 2007. It confirms the success of our strategy ‘Responsible growth. Shared Success.’ to ensure the highest sustainability standards for our customers and shareholders, as well as for the planet.
Our newly defined purpose
In November, we announced our newly defined purpose, ‘Creating for happier, healthier lives with love for nature. Let’s imagine together’. It is supported by bold and ambitious goals, including becoming a climate-positive business before 2050, and doubling our business through creations that contribute to happier, healthier lives by 2030.
For the last 250 years our creations have inspired emotions and touched millions of lives. By defining the ‘why’ behind what we do, we are providing a compass to further guide our choices and set strategic goals. Our purpose and supporting ambitions will drive sustainable, long-term performance while leading the way to improve happiness and health for people and nature. We are committed to contribute even more to our customers, our people, society and nature.
Key priorities for 2020
We enter the final year of our 2020 strategy confident we will deliver on the goals we set for this strategy cycle, but we also remain alert to the evolving market environment and the need to adapt and stay agile.
Innovation, digitalisation and sustainability will continue to challenge our approaches, providing opportunities to do things differently and offer differentiation for our customers. Givaudan Business Solutions, set up to drive the ‘Delivering with excellence’ pillar of our strategy, will be fully established in 2020. It will support us in creating the additional financial resources needed to continue growing with our customers.
Throughout this Integrated Annual Report you will discover the many ways our employees have advanced on our strategic goals, driving towards our vision of ‘Responsible Growth. Shared Success.’ It is their daily passion and commitment that makes Givaudan an inspiring place to work and I am proud of all their achievements.
Launching our newly defined purpose marks a new chapter in our 250 years. It is our compass to guide our strategic choices and live by it in our day-to-day actions. I am excited about making the final push to deliver our 2020 strategy and about the opportunities ahead.
Chief Executive Officer