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Jefferies downgraded Symrise AG (ETR:SY1G) (SY1:GR) (OTC:SYIEY), a $16 billion market cap flavors and fragrances company with $5.2 billion in annual revenue, from Hold to Underperform on Monday, while reducing its price target to EUR90.00 from EUR100.00.
The research firm cited concerns about staples demand in the ingredients sector, noting that while Symrise is relatively protected compared to large-cap customers due to private label and small customer support, a modest inventory build suggests weaker volumes in the second half of the year. According to InvestingPro, the company has historically demonstrated low price volatility, with a beta of 0.51.
Jefferies expressed skepticism about Symrise’s topline outlook, which requires stronger performance in the second half of the year during the first year of the company’s new CEO’s strategy implementation. Despite these concerns, InvestingPro data shows the company maintains strong fundamentals with a ’GREAT’ financial health score and has consistently paid dividends for 18 consecutive years.
The firm downgraded its mid-term EBITDA forecast by 4%, positioning its estimate 3% below consensus, and incorporated lower long-term margins in its discounted cash flow analysis.
Symrise, a global supplier of fragrances, flavors, and cosmetic ingredients, faces these headwinds as it navigates shifting market conditions under its new leadership.
In other recent news, Symrise reported first-quarter sales of €1,317 million, slightly below the consensus estimate of €1,329 million. However, the company achieved stronger-than-expected organic growth of 4.2%, surpassing the forecast of 3.5%. The earnings before interest, taxes, depreciation, and amortization margin was around 21%, closely matching the consensus of 21.1%. Symrise is considering strategic options for its Terpene business within the Aroma Molecules division, aiming to streamline operations and improve margins. This sector, which contributes over €100 million in revenues, has margins close to zero, and optimizing it could enhance overall margins by up to 40 basis points. The company reaffirmed its long-term targets for organic growth between 5% and 7% and plans to maintain an EBITDA margin of around 21%. Analysts from Jefferies noted a positive market reaction to these developments, particularly the strong organic growth and strategic business considerations. Symrise’s plans for the Terpene business could potentially support its long-term financial goals.
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