Swiss crisis impacts Givaudan shares

Givaudan’s share price tumbled by more than 16% after Swiss Central Bank abandoned its currency cap

The Swiss Central Bank abandoned its currency cap two weeks ago, in a move that stunned financial markets.

But the knock-on effect for some domestic companies was particularly significant: Givaudan’s share price tumbled by more than 16% in just a few days after the three-year-old cap on the franc (CHF) was made.

However, Analyst Adam Collins from Liberum said Givaudan is unusual among export-orientated Swiss operators because it has little profit exposure to the eurozone.

He said “[Givaudan] has only a very small Eurozone profit base because of expensive operations in the region such as the perfume school/fragrance clinic near Paris and R&D centres, so movements in the Euro/CHF have a negligible impact on profit margins and absolute earnings.”

However, Collins said the move will affect eurozone revenues for Givaudan. Broadly, national currency movements of up to 2% or 3% are generally considered big. Following the Swiss move the CHF appreciated by close to 40%.

Nicholas Ebisch from currency broker Caxton FX told CBN: “For me, it was a complete surprise. No one saw this coming.”

Perfume and flavour company Firmenich may also be affected. However, it is important to note the Geneva-based business does not have public shareholders.

The Swiss move may be good news for Givaudan’s non-Swiss-based competitors, such as German-based Symrise and US-based IFF, making their products more price-competitive in comparison.

For smaller Swiss companies, “the move is disastrous,” Ebisch added. Before going to press Givaudan shares sold for 1,592 CHF. Earlier in January its shares sold for as high as 1,943 CHF.

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