Q1 results: LVMH and Givaudan successfully brace economic headwinds as BASF sales take a hit

13 Apr 2023 --- Macroeconomic turmoil has continued to trouble the industry during this year’s first quarter. However, Moët Hennessy Louis Vuitton (LVMH) and Givaudan have managed to increase sales on the back of high-end products, which continue to generate enthusiasm among consumers. On the other side, BASF’s preliminary numbers for the quarter are “considerably lower than average analyst estimates,” with the company predicting a decline in sales.

LVMH is triumphant in its financial statement, sharing its enthusiasm with shareholders with the company’s stock up over 4.5% today. The company’s start of the year has been “excellent within a geopolitical and economic environment which remains uncertain.” The French business has reported 17% organic growth and 10% for its Perfumes & Cosmetics category.

Givaudan describes its first quarter as a “solid start to the year.” Fragrance & Beauty led the company toward a growing sales performance, up 6.8%, spearheaded by its Fine Fragrances business unit, which has grown 20.9% in Q1.

The German chemistry giant declined to comment on the released preliminary figures and to explain the reasons behind its sales decline. BASF will publish the final results of Q1 on April 27. 

Nonetheless, its preliminary results show a 13.4% decline in sales during the first quarter, down to €19.99 billion (US$22.09 billion) from €23.08 billion (US$25.51 billion) in Q1 2022. Sales have been US$2 billion under analyst expectations, according to the business.

LVMH “highly selective” focus
The Perfumes & Cosmetic business group of LVMH continued to center its efforts in what they call “highly selective distribution.”

LVMH high-end products and Givaudan's Fine Fragrances outperformed the general market. In perfumes, Christian Dior achieved a “remarkable performance” in Europe and the US with Sauvage. Miss Dior and J’Adore fragrances also being significant channels of growth. 

The French group also spotlights the good performance of its make-up and skincare brands, expanding its The Proefessional skincare range and its Fenty Beauty brand benefiting from the visibility generated by Rihanna during this year’s Super Bowl. Moreover, LVMH says its refillable lipstick has been a “success.”

The company reveals Europe and Japan enjoyed strong growth momentum, benefiting from robust demand from local customers and international travelers. Meanwhile, the US has steadily grown and Asia has rebounded “significantly” after China lifted its health zero-COVID-19 restrictions late last year. 

“The Group will continue to pursue its strategy focused on developing its brands, driven by a sustained policy of innovation and investment as well as by a constant quest for quality in its products, their desirability and distribution,” LVMH explains.

Givaudan “continued focus”
The Swiss business highlights that it managed to maintain its growth path by not putting all the eggs in one basket.

“Our solid Q1 sales once again demonstrate the importance of the balance that Givaudan has across the different business segments, geographies and client groups. We have also demonstrated our continued focus and innovation programs which allow our customers to bring great products to the market,” says Gilles Andrier, CEO at Givaudan.

Givaudan’s Fragrance & Beauty sales amounted to CHF 837 million (US$944 million) up 6.8%. 

“The sales growth was driven by the volume increases in Fine Fragrance with sustained high levels of new business. In addition, pricing actions were implemented in all business units. The growth was achieved across all customer groups with particularly strong performance in the high growth markets [South Asia, Africa, Middle East and Latin America],” explains the business.

Its Fine Fragrance business unit grew by 20.9%, followed by Active Beauty up 5.1% and Consumer Products up 3%.BASF will presents its definitive Q1 results April 27. 

The growth of its Fragrance & Beauty sales outgrew its Taste & Wellbeing sales by 1%. 

This quarter Givaudan agreed to purchase Amyris’ cosmetic ingredients to advance in biotech. PersonalCareInsights spoke to Pauline Martin, head of global communications and S&T Marketing of Fragrance & Beauty at Givaudan, who stated that biotechnology is the future of beauty.

BASF sales fall short
The German business sales declined in the double digits (13.4%), nonetheless, the company managed to surprise analysts positively, turning in a net income of €1.56 billion (US$1.73 billion). 

BASF didn’t explain in its results the reasons behind its drop in sales.

However, in its Q4 presentation of last year it showed some clues on what might have happened. The company’s chemical production was down in the EU in Q4 by 15.7% from a year earlier, underperforming the year average of -5.8%. 

Last year’s sales also decreased, by 2.3%, with volumes declining significantly (15.4%), which the company compensated partially with a 9.2% increase in prices, which affected all segments except for chemicals.

In the full year 2022, BASF incurred in €3.2 billion (US$3.64 billion) higher energy costs globally. 

In strategic moves, this quarter, BASF unveiled that it will open a new citral plant in Zhanjiang, China and menthol and linalool downstream plants at its Verbund site in Ludwigshafen, Germany, are expected to boost the company’s aroma ingredients portfolio from 2026 onward.

By Marc Cervera