For Symrise, the Dax is within easy reach

Very few consumers know the name, but there is a high probability that they have already had the flavor manufacturer’s products on their tongue or in their nose. The rise in the leading index of the German stock exchange could follow soon.

A Symrise employee tests a gas chromatograph.

Dhis statement by Heinz Jürgen Bertram, CEO of the fragrance and flavor manufacturer Symrise, the shareholders will be happy to hear when presenting the balance sheet for the Corona year 2020: “We want to go back to the original growth dynamics in 2021.” Because last year was over – especially in the fourth quarter – very out of round. In 2020, Symrise not only had to struggle with the economic effects of the Corona crisis, but also with a cyber attack at the end of the year. This prevented the fragrance and flavor manufacturer from achieving its growth goals. As a result, the company had to temporarily suspend large parts of its production in mid-December and missed its planned growth target.

However, the profitability of the M-Dax Group remained at a high level, so that the year can be booked as a success in view of the difficult market conditions. Symrise expects a lot more for the future. Long-standing shareholders can confirm that – looking into the depot is still fun. Anyone who recognized the company’s potential in the world of flavors and fragrances ten years ago has multiplied their share returns. To date, 10,000 euros have turned into more than 48,000 euros.

It seems unlikely that Symrise’s potential could decrease. According to CEO Bertram, the company, with more than 10,000 employees at over 100 locations around the world, aims to achieve organic growth of five to seven percent this year and thus grow faster than the global market for fragrances and flavors, according to Symrise according to a market share of 10 percent.

Also natural raw materials

The market itself is very exciting, the food industry is changing. People pay more attention to healthy and sustainable nutrition. In addition, trends such as meat substitute products have picked up speed. Symrise participates in the new trends with solutions for a balanced taste for sauces, soups, ready meals and many other culinary products. Within the Nutrition segment, the Diana division exclusively uses natural raw materials and uses them to produce natural and sustainable food components, while the Scent & Care division develops “sensual fragrance experiences” for consumers around the world.

Our author Christoph Scherbaum is a stock exchange specialist and works as a financial journalist from Ludwigsburg.
Our author Christoph Scherbaum is a stock exchange specialist and works as a financial journalist from Ludwigsburg.: Image: Christoph Scherbaum

The Symrise management is confident about the current financial year. The delivery backlogs caused by the cyber attack have now largely been resolved and the IT systems have been fully restored. In addition, the global economy should pick up after the Corona dent. The operating margin, measured in terms of earnings before interest, taxes, depreciation and amortization (Ebitda) is expected to be around 21 percent despite the slight increase in raw material prices.

In 2020, Symrise increased its sales by 3.3 percent to 3.52 billion euros, taking into account portfolio and exchange rate effects. Organically, sales rose by 2.7 percent. The market growth was only 1.0 percent.

In the medium term, things should continue to be similarly positive. According to the forecast, sales should increase by an average of 5 to 7 percent annually by the end of 2025. This should succeed because Symrise has aligned its business model along central global megatrends, including a growing world population, economic progress in emerging countries and the trend towards healthier nutrition and natural ingredients.

Given the positive outlook, Symrise could move up to the top German stock market league. This requires a good balance sheet and solid share price development. If the German benchmark index is switched to 40 index members from September 2021, Symrise should be part of it.

Solid analyst assessments

On the part of the analysis houses, there are plenty of positive assessments. Deutsche Bank has left the Symrise rating based on quarterly figures at “Buy” with a target price of 124 euros. The outlook of the flavor and fragrance manufacturer for 2021 is confident, it said.

The UBS analysts also recommend buying the share and see a price target of 118 euros. Both price targets are in the range of the previous all-time high and are certainly not unrealistic. A look at the chart also shows this.

SYMRISE

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To the detailed view

After the Symrise share briefly slipped back to EUR 71 in March 2020, the prices returned to the fore and climbed to a new record high of EUR 121 by October last year. This was followed by a sharp correction to EUR 96 by February 2021 and a recovery movement in March, during which it was possible to regain the round EUR 100 mark. The latest price increases could now have given the starting signal for the next price rally, which would bring the all-time high of last October at 121 euros back into focus.

Reliable dividend payer

The chances of new record highs are good, because Symrise has been listed in the overall upward trend since 2009 and the share has since achieved an impressive price gain of an average of 18 percent per year.

In addition, there is a fact that is anything but self-evident in times of Corona: Symrise not only pays a dividend for the past financial year, shareholders can even look forward to an increase. The distribution is to be increased from EUR 0.95 per share in the previous year to EUR 0.97. It would then be the eleventh dividend increase in a row.