dsm-firmenich reports Q3 perfumery and beauty gains, prepares Habanolide facility launch

31 Oct 2023 --- In its third quarter outlook for fiscal year 2023, dsm-firmenich’s Perfumery & Beauty segment was reported to have performed well, despite a slowing of momentum caused by a Pinova factory closing in the US. For its overall group, the supplier has set its sights on achieving an estimated Adjusted EBITDA of around €1.8 billion (US$1.9 billion).

However, this projection factors in significant headwinds, including a negative vitamins business impact of approximately €500 million and adverse foreign exchange effects of about €90 million (US$95 million). 

To navigate these challenges, the company has initiated a comprehensive strategy, focusing on cost reduction, vitamin transformation, integration and a thorough review of its segments. In the previous fiscal year, the company reported a 7% decline in organic sales, driven by a combination of pricing and volume reductions, notably affected by the negative impact from vitamins.

“Customers of dsm-firmenich are increasingly reformulating existing products with more innovative fragrances, signaling a positive shift in business momentum.In the current global economic environment we are working hard to mitigate the effects through strong internal actions. To this end, we are driving a broad range of self-help measures, with the largest contributor being the vitamin transformation program,” remarks Dimitri de Vreeze, CEO at dsm-firmenich.

“In addition, we have pushed harder on cash flow, a key priority for us, and see good improvements this quarter. At the same time, we remain relentlessly focused on the successful integration of the merger and the delivery of our targeted synergies,” he adds.

“We are reviewing all segments to prioritize and accelerate the company’s high growth and higher margin business. We will provide an update on progress of all our strategic actions at our Capital Markets Day next year.”

Perfumery & Beauty division performance
DSM’s Perfumery & Beauty division demonstrated a 2% organic sales growth, despite a 2% negative impact stemming from the Pinova plant closure in Georgia, US. This growth was driven by a 3% increase in pricing across all segments, although it was partially offset by lower volumes in Ingredients due to destocking and soft demand.

The Fine Fragrances business delivered “good performance against a tough comparable prior period.” Consumer Fragrances also contributed to this success with robust growth, marked by strong volumes and pricing. Customers are increasingly reformulating existing products with more innovative fragrances, signaling a positive shift in business momentum. 

In the space of Ingredients for beauty applications, soft demand and ongoing destocking remained challenges, particularly in the industrial offerings. However, Personal Care continued to deliver strong results.

Perfumery & Beauty’s Adjusted EBITDA stood at €212 million (US$225 million), taking into account an 8% negative foreign exchange effect. Excluding this effect, the Adjusted EBITDA would have seen a 6% increase. Notably, the Adjusted EBITDA margin reached 23%, marking a 110 basis point increase compared to the prior year, thanks to an exceptionally positive product mix.

The supplier has also disclosed that its Taste and Texture & Health remained resilient. However, Health, Nutrition & Care and Animal Nutrition & Health struggled due to record low vitamin prices.

New Habanolide perfume facility
In other key developments this month, dsm-firmenich announced the upcoming commissioning of a brand-new Habanolide facility at its production site in southwest France. The new facility is anticipated to significantly increase the production capacity of this “iconic” perfume ingredient and help meet the rapidly growing demand for sustainable products. 

Habanolide is an elegant macrocyclic musk with a warm and slightly woody note. It is a key ingredient in the company’s industry-leading palette, and extremely popular in combination with dsm-firmenich’s renewable musks such as Helvetolide and Romandolide, as well as with the recently introduced captive ingredients Sorbettolide and Casmiwood. This capacity increase will also benefit the Habanolide derivatives Exaltolide Total and Exaltolide.

The new dsm-firmenich Habanolide facility in southwest France is slated to be operational in January 2024.The new production facility will be operational in January 2024.

“This is our first Habanolide production unit in Europe,” says Emmanuel Butstraen, president Perfumery & Beauty at dsm-firmenich. “It will further strengthen our strategic position and enable us to offer additional capabilities for perfumery production in the region.”

“In addition to helping us capture the growth opportunities that lie ahead, it will also contribute to lowering the carbon footprint of our logistics operations. We’ll be able to provide an enhanced service close to our customers in Europe and help them deliver on their own sustainability goals by reducing their scope 3 emissions.”

Spanning across four levels, the new facility will feature cutting-edge technologies ensuring the highest safety standards, operational stability, quality, energy efficiency and reduced water consumption. The entire project is being completed by a dozen local companies, who have been engaging around 40 subcontractors daily for the past year.

“We are very proud of this new production unit, designed to increase the supply of this biodegradable and powerful musk which is one of our best-selling ingredients,” adds Amaury Roquette, head of Ingredients, Perfumery & Beauty at dsm-firmenich. 

“This facility will allow us to produce Habanolide in Europe, in addition to the production line in New Jersey, US. With this additional project, we are strengthening our global leadership in musk ingredients.”

dsm-firmenich has a history in the production of musk ingredients. “Years of dedication to research and development have positioned the company as a market pioneer, earning it global recognition as the ‘House of Musk,’” states the company.

This expansion project received €1 million (US$1.06 million) in support from the national recovery plan implemented by the French government and the regional authorities of Nouvelle Aquitaine to accelerate industrial investments in France.

By Benjamin Ferrer