Swiss fragrance and flavours maker Givaudan’s core profit fell 6.6 percent in the first half of 2023, weighed down by subdued demand in its taste and wellbeing unit, particularly in North America.

First-half earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at 763 million Swiss francs ($891.25 million), slightly beating an analyst forecast of 751 million francs compiled by the company.

Givaudan’s taste and wellbeing unit, selling food and beverage extracts and contributing 53 percent to group revenue in the period, saw its EBITDA drop 16.3 percent.

Its second-largest business, the fragrance and beauty unit, reported a 5.8 percent EBITDA increase.

Group sales rose 2.4 percent to 3.74 billion francs on a like-for-like basis, which was below analysts’ forecasts of 3.4 percent growth as well as the company’s mid-term target of 4-5 percent annual average organic sales growth.

North America was, for another quarter, the only region to record a decline, with sales dropping 10.6 percent on a like-for-like basis.

“North America continues to be relatively subdued on both taste and on consumer products,” finance chief Tom Hallam told Reuters.

The subdued demand, a problem for Givaudan’s rivals as well, is also related to the fact that in times of high inflation, customers prefer to first de-stock inventories. “All of our customers are destocking today,” Hallam said.

However, the group still managed to pass on higher input costs to customers.

“Consumption was running pretty high because after the pandemic people were a bit constrained, but now the patterns are shifting a bit, so they are spending more on services, travelling again and eating out, rather than on packaged food,” Vontobel analyst Arben Hasanaj said.

Shares were down 1 percent at 2.94 Swiss francs 0910 GMT, while the Swiss blue-chip index traded 0.3 percent higher.

By Jagoda Darlak and Matteo Allievi; Editors Milla Nissi and Sharon Singleton

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