Givaudan SA (GIVN.SW) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Givaudan 2022 Half Year Results Conference Call and Live Webcast. I am Alice, the Chorus Call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Gilles Andrier, CEO. Please go ahead, sir.

Thank you. Ladies and gentlemen, welcome to our 2022 half year results conference call. I will be on this call with Tom Hallam, our CFO. We'll take you through the presentation before answering your questions at the end. The company news on our half year results 2022 was published on our website this morning. This is where you will also find the slides for today's presentation. Along with the media release, you will find our 2022 half year report on our website. I'd like now to start going through the presentation. I invite you to turn to Slide #4 to go through our performance highlights. So I'm very happy to share you -- with you an excellent sales growth and a solid financial performance for the first half of 2022 in a highly challenging environment, to say the least. Once more, forecast for 2022 were certainly difficult to make at the start of the year notably due to tough comparables of 2021. COVID-related concerns slowly phasing down, continuous challenges with our supply chains and then to add to the list, new geopolitical and economic uncertainties emerged at the early stage of the year, making our environment even more difficult to predict and to operate in. Our results for this first half demonstrate again the resilience of our business, supported by our natural hedges, [ bids in ] product categories, [ in types of ] customers or through the balanced geographic footprint, and thanks as well to the unique quality of our organization and the dedication of our employees whom I'd like to warmly thank. Our sales continued to benefit from a robust demand. Overall, volumes improving further in the second quarter across all categories and especially the ones which had already strongly rebounded last year, notably, Fine Fragrances. These results were especially good in the strategic product categories we have chosen for the coming 5 years. Confirming our 2025 strategy makes perfect sense and to name a few of those categories: health and well-being, naturals, alternative proteins, active beauty. Similar to our strategic focus areas in terms of customers and geographies, local and regional clients have continued to outperform and now account for 56% of our group sales. I'm equally glad to report that high-growth markets have gathered pace notably in the second quarter and outperformed again mature markets. We have made as well an excellent progress with the integration of our recent acquisitions over the last months, albeit at a slow pace in order to focus the organization's attention on protecting the present customer satisfaction in a very tight supply chain environment. In the first half of 2022, we reached sales of CHF 3.6 billion, a growth of 6.2% on a like-for-like basis and 8.3% in Swiss francs. This was achieved across all markets, segments and customer categories despite high comparables in 2021, supported notably by a balanced growth between mature markets, which are up 5.4%, and high-growth markets, which are up 7.4%; local and regional clients, which have been growing double the pace of global customers; and our key strategic product categories, which are already named. Our pricing actions to recover the absolute amount of input cost inflation are well underway with close to 40% of our 6.2% like-for-like growth being pricing versus 60% volume growth in the first half overall. As I said earlier, Fine Fragrances continued to grow despite high comparables, largely supported by the upturn in travel retail and the continued strong momentum of e-commerce. The other part of COVID-impacted business, foodservice, thanks to a good growth is now almost fully back to the pre-pandemic level. We achieved a comparable EBITDA of CHF 820 million. It represents an underlying EBITDA margin of 22.5% compared to 24.2% in the first half of 2021. Free cash flow was minus CHF 147 million, representing a minus 4% of our sales driven by the higher working capital requirements, notably, inventories and higher investments compared to 2021. I'm really pleased with the solid performance of our business. With all parts contributing to these excellent financial results, we have shown our resilience, our focus on supporting our customers and our ability to capture opportunities. Let's now turn to Slide 5. On a like-for-like basis, our Fragrance & Beauty division grew 4.7%, and our Taste & Wellbeing division grew 7.6% versus the same period of 2021. As I mentioned earlier, this performance was driven by further strength in Fine Fragrances, continued recovery in foodservice as well as good growth in most of the categories despite the tough first half 2021 comparables. Once again, all our strategic focus areas complemented by acquisitions have contributed to our growth, namely, health and wellness, naturals, local and regional customers outperforming sales with our multinational customers, which also though showed a very good momentum. Finally, as I mentioned earlier, these numbers include a pricing element, reflecting the ongoing recovery of our input cost inflation, which brings me to say that thanks to the collaboration with our customers, we are fully completed with our pricing actions to fully recover over a period of 18 months those additional input costs by June 2023, as promised and guided for at the beginning of this year. Let's turn now to Slide 6. In the first half of 2022, high-growth markets delivered a 7.4% growth, gathering pace notably in the second quarter after a relatively slow start in 2022. This was achieved despite the pandemic still disrupting parts of both Southeast Asia and China. Despite high comparables in 2021, Latin America kept performing well. The Middle East contributed with strong growth levels as well, and Asia Pacific remains a mixed bag with below the usual average growth rate. In mature markets, we grew a healthy 5.4%. The strong demand in Fine Fragrances and the further recovery of foodservice fueled the strong recovery in Europe as the economy there reopened later than most of the regions in the last few months. North America reported a slight decline in sales due to the combination of high comparables and the supply chain ongoing challenges throughout the first half of this year. The markets of Asia, notably, Japan and Australia, remain affected by the pandemic. Our presence in high-growth markets has always been a key driver for our growth and continues to be one of our key strategies for 2025. Structural demographic trends, the ever-growing middle class and the strong urbanization trends will continue to support the growth of these markets, especially in Asia where urbanization and the middle class are still below average. Our market position and our operations footprint give us a unique exposure to these high-growth markets in which we continue to invest both with additional talent and new facilities to service the wide diversity of our clients. However, we have seen in the past months how critical our geographical balance is, creating natural hedges against the crisis or economic downturn where the timing or the intensity of the recovery can be very different across geographies as seen over the last few quarters. Please now turn to Slide 7. I'd like to highlight the sales development by region for the group. As you can see, EAME/EMEA, Europe, Middle East and Africa, has delivered a very strong growth, followed by Latin America. EAME grew a record 13.7% supported by the strong recovery of most product segments. It's also worth mentioning that the Middle East has also enjoyed a very high growth rate within the region. Sales in Latin America continued to perform well despite high comparables with a growth rate of 9% driven mainly by Argentina, Mexico and Chile. The growth in Asia Pacific was 2.7% with flat growth in China against the very high double-digit growth rate in 2021 in China; high single-digit growth in some major markets, including India and Indonesia; and more subdued growth in other parts of Southeast Asia, notably, Vietnam, Thailand and the Philippines; and then the mature markets like Japan and the Pacific area. Finally, North America was -- grew a negative 1.5% like-for-like against the high comparables of the first half of 2021, which experienced a strong and early rebound of the economy and consumer demand, but equally, some supply chain challenges still ongoing in 2022. Let's turn now to Slide 8. The Fragrance division grew 4.7% on a like-for-like basis against the strong comparable growth of 10.1% in 2021 and a growth of 5.3% in Swiss francs for the first half of '22. The good growth was driven by the double-digit growth in Fine Fragrances and in Fragrance Ingredients, and Consumer Products returned to growth in the second quarter. Fine Fragrances sales increased by 17.9% on a like-for-like basis, already against a very strong first half in 2021 where sales in Fine Fragrances increased by 34.5%. Therefore, the CAGR over 3 years for the 6-month period is 10.2%. This performance is driven by new business wins, notably, the Prestige segment. Consumer Products sales increased by 0.4% on a like-for-like basis against a prior year comparable of 4.1%. On a 3-year basis, the 6 months CAGR amounts to 5.1%. This performance was driven by local and regional clients. Sales of Fragrance Ingredients and Active Beauty grew by 8% on a like-for-like basis against a high sales growth of 14.4% in the prior year, particularly in Active Beauty. The performance in the first half 2022 reflects the continued strong demand for Fragrance Ingredients and premium actives in Active Beauty. Now let's turn to the next slide, #9. Taste & Wellbeing sales were CHF 2 billion, an increase of 7.6% on a like-for-like basis and an increase of 10.9% in Swiss francs. Whilst the sales performance was still affected by the impact of the COVID-19 pandemic across many countries as well as supply chain challenges, a very good business momentum was seen and maintained across all regions. On a regional basis, sales were driven by Europe, SAMEA and Latin America. In Europe, sales increased by 14%. In South Asia, Africa and the Middle East, sales increased by 16.9%. In Latin America, sales increased by 17.1%. And in Asia Pacific, sales increased by 5.1%. In North America, sales decreased by 0.9% on a like-for-like basis against the relatively high comparable of 6.1% a year ago. The foodservice segment continued to experience a strong recovery and is now back -- almost back to pre-COVID levels, therefore, the '19 levels. In the key strategic focus area, sales increased double-digit in plant-based proteins, health and wellness and a very solid single-digit growth in naturals. Finally, from a segment perspective, the positive sales performance was mainly driven in beverages, sweet and snacks. With this, I'd like to hand over now to Tom, who will give you more granularity on our financial performance. Tom, over to you.

Thank you very much, Gilles. I would also like to welcome you all to our conference call. As always, Gilles has taken you through the main business performance of the group and also the market and the regional development. On the following slides, I would like to focus on the group's operating performance and those of the 2 divisions. Let's start with the performance highlights on Slide 11. So as Gilles mentioned, the group sales for the first half of 2022 were over CHF 3.6 billion, an increase of 6.2% on a like-for-like basis, which excludes the impact of acquisitions as well as any currency impact. In Swiss francs, sales increased by 8.3%. The reported EBITDA increased to CHF 816 million compared to CHF 809 million in 2021, and the underlying EBITDA margin was strong at 22.5% despite higher input costs and inbound supply chain disruptions. Net income was CHF 440 million or 12.1% of sales. And as Gilles has mentioned, free cash flow as a percentage of sales was minus 4%, mostly driven by higher working capital requirements to support our supply chain and our customers in an extremely challenging operating environment. Net debt-to-EBITDA was 3.45x compared to 2.97x at the end of 2021. In the following slides, we will cover the group's performance in further detail as well as the operating performance of both divisions. If we turn to Slide 12, we can look at the exchange rate development. The global political environment and the economic uncertainties caused the Swiss franc to fluctuate against some of the major currencies in which the group operates, particularly during the first few months of the year. This had a significant impact on other operating expenses, which I'll comment on later. However, our operational and geographical spread has offset the up and down currency fluctuations and therefore, continues to provide good natural hedges which protects our EBITDA margin. Please turn to Slide 13, which shows the group operating performance. In 2022, the group's gross margin decreased due to the gross margin dilution effect of the pricing actions as well as the impact of higher raw materials, energy and freight costs. This resulted in a gross margin of 40% in 2022 compared to 43.9% in 2021. As I mentioned, the EBITDA increased to CHF 816 million in the first 6 months of this year. In the period, the group incurred CHF 4 million related to acquisition and restructuring costs compared to CHF 7 million in the previous period. On an EBITDA level, we continue to maintain a tight cost control on operating expenses, which partially absorbed the impact of the lower gross margin. This resulted in an underlying EBITDA margin of 22.5% compared to 24.2% in 2021. On the next 2 slides, I'd like to spend a moment on the operating performance of our 2 divisions, starting with Fragrance & Beauty. Fragrance & Beauty sales increased by 4.7% on a like-for-like basis and 5.3% in Swiss francs to CHF 1.6 billion. The division recorded CHF 362 million of EBITDA in the first 6 months of the year compared to CHF 375 million in 2021. The EBITDA margin was 22% on a reported basis and 22.2% on an underlying basis. As commented by Gilles, the strong -- the sales growth was driven by a strong volume increase in Fine Fragrance as well as double-digit growth in Fragrance Ingredients. The margins, however, have been impacted by higher costs input seen in the first half of 2022. If you now turn to Slide 15, we will continue with Taste & Wellbeing. The Taste & Wellbeing division recorded a high sales increase of 7.6% on a like-for-like basis and 10.9% in Swiss francs. The sales increased to over CHF 2 billion for the first time and in the first half of this year. The reported EBITDA increased to CHF 454 million from CHF 434 million last year as a result of strong cost discipline to offset the inflation of high raw materials and higher expenses during -- due to supply chain issues. The reported EBITDA margin was 22.6%, and the underlying EBITDA margin was 22.7%. The income before tax decreased to CHF 512 million from CHF 566 million in 2021 caused by higher nonoperating expenses compared to the prior year, namely, CHF 119 million in 2022 compared to CHF 47 million in 2021. Although financing costs remained stable, the group incurred higher realized and unrealized losses on FX derivatives given the volatility of currencies and interest rates, particularly in the first few months of the year. In addition, there was a CHF 50 million noncash swing in the value of the company's financial assets. The net income was CHF 440 million or 12.1% of sales. The group's effective tax rate decreased to 14% in 2022 compared to 15% in June 2021. Basic EPS was CHF 47.74 in 2022 compared to CHF 52.19 in the first semester of 2021. Please turn to the next slide for the cash flow performance. During the first half of 2022, Givaudan had a negative free cash flow of CHF 147 million or minus 4% of sales compared to 5.5% of sales in 2021. The operating cash flow for the first 6 months of the year was CHF 131 million compared to CHF 415 million in 2021. The decrease in the operating cash flow is mostly driven by the higher cash investment in working capital driven by the need to manage the inbound supply chain disruptions that the group has been facing in order to continue to deliver and satisfy to a high level the needs of our customers. The group also continued its investments to support the growth in all markets. As such, total net investments were CHF 164 million in the first half of the year and as a percentage of sales were 4.5% in 2022 compared to 3.6% in 2021. Working capital increased to 29.6% of sales compared to 28.3% in 2021 with higher accounts receivable and higher inventory levels related to the good sales growth and the supply chain challenges that I have already mentioned. Please turn to Slide 18 to look at the amortization of intangible assets. At the end of 2021, we showed you the forecasted amortization of intangibles. The projection has now been updated as we've completed the purchase price allocation for the 2 last acquisitions we made in 2021, notably, Custom Essence and DDW. And this table gives you a perspective of the future expected amortization. Please turn to Slide 19 where we will cover the debt profile of the group. The group continues to have a well-balanced debt profile with a weighted average effective interest rate of 1.34%, which is a slight decrease from last year. Furthermore, on this slide, you will find the maturities of our debt profile as well as the respective average interest rates for each debt maturity. In June 2022, the group refinanced its multibank committed credit facility for an amount of CHF 1.25 billion for a period of 5 years, with 2-year extension options and the possibility to upsize the facility during its term. This renewed facility is also the first financing event completed under the group's sustainable-linked financing framework. Net debt compared to EBITDA was 3.4x compared to 2.9x in December 2021 and 3.16x in June 2021. With this, I would like to conclude my part of the presentation and hand back to Gilles.

Thank you, Tom. The company's 2025 ambition is to deliver sustainable value creation for all stakeholders. Givaudan's 2025 strategy is fully in line with our purpose and places customers at the heart of our business, supporting them to grow and create products that are loved by consumers. Let me remind you the main foundations of our current strategic cycle. The '25 strategy is focused around 3 growth drivers: first one, expand the portfolio; second, extend customer reach; and the last one, focused market strategies. And it is supported by 4 growth enablers, which are aligned with the company's [ topmost ] domains, namely: creations, nature, people and communities. These 3 growth drivers and 4 enablers are all underpinned by a commitment to excellence, innovation and simplicity in everything that we do. Let's turn now to Slide 22 that reminds you the performance commitments of the 2025 strategy. We're actually in the second year of our 5-year strategic cycle. And as I mentioned earlier, so far, business trends, customer trends and consumer behavior in an environment impacted by the pandemic are confirming and reinforcing our strategic choices. Ambitious targets are an integral part of Givaudan's 2025 strategy with the company aiming to achieve an organic sales growth of 4% to 5% on a like-for-like basis and a free cash flow of at least 12%, both measured as an average over the 5-year period strategic cycle. In addition, the company aims to deliver on key nonfinancial targets around sustainability, diversity and safety linked to the Givaudan's purpose. I'm confident we are on the right path to deliver on those ambitions. And now let's turn to Slide 23. Let me give you some facts about the coming months. We clearly remain focused on delivering on our pricing actions to compensate for input cost inflation. And I can confirm today that overall, raw material inflation in the P&L for 2022 will be around 9%. Given the current challenges around energy supply, notably, in Europe, we are planning for business continuity in order to ensure the right adaptability of our production setup. In operations, our focus lies on maintaining operations and supply chain performance at high levels to support our customers and on the continued cost discipline throughout the business. The integration of acquired companies on to Givaudan's operating platform continues to make good progress, and we are progressing further with the implementation of the 2025 strategy. Finally, we are making further progress on our broad-based ESG agenda whilst effectively managing the current business priorities. With this, ladies and gentlemen, many thanks for your attention. Tom and I are now looking forward to your questions.

Our first question comes from the line of Heidi Vesterinen with BNP Paribas.

So I have 3 questions. First, you talked about tight cost control in your speech. Should we expect items such as R&D and sales and marketing to be lower as a percentage of sales going forward? Or was there some phasing in on the H1 results as that is what had helped your EBITDA margin? Second question, could you talk about your expectation in terms of free cash flow and your leverage on a full year basis, please, as 3.5x is on the high side for your company? And then a third related question. I wondered to what extent your leverage impacts your thinking on further M&A. Can you remind us on what you're thinking? What kind of size you would be looking at? There's been deals in the sector recently. Does that change your thinking at all?

Thank you, Heidi. So yes, the question on are we cutting on R&D expenses, absolutely not. This is the engine of Givaudan. In the first place, I can confirm that the actual brief pipeline that you know that we are measuring on a monthly basis across the whole group is in very good shape, also the amount of new wins that we see going forward. So the fact that the ratio of operating expenses has been going down over the sales has a lot to do that. Yes, we are tightening expenses, but more on the discretionary expenses. We are maintaining, obviously, a bit of a headcount neutral. But in no way are we cutting jobs in any way or are slowing down the investment especially related to working on briefs with our clients and so forth. So the fact that the ratio is going down has a lot to do, obviously, with the fact that the sales growth is high and therefore, that helps on the ratio, and the fact that we're also frugal on some -- many items, which are not critical to servicing our clients. Then I guess I hand over the question on free cash flow to Tom.

Yes. Thanks, Heidi, for the question. And just to -- a couple of additional comments particularly on the OpEx. Of course, you will have seen in the half year report in the [ back half ], we have a table which shows the amortization of intangibles, which is split between the various elements. We actually have about CHF 12 million of reduction in amortization of intangible expense year-on-year. So that's also driving the reduction in absolute R&D expense and selling and marketing. And then, of course, as I mentioned, there's a lot of volatility in currencies. We are naturally hedged on the EBITDA margin. But of course, you can have currency swings throughout the P&L. On the free cash flow and on the leverage, in any year, it's really finding the right balance between supporting our customers on growth, investing in the future. And you made the comment on R&D. But if you look at our CapEx, we have a significant increase in CapEx this year, which is a clear demonstration of our long-term commitment to invest; and finally, delivering on our long-term financial targets. The reason that we set 5-year financial targets is to take into account the volatility that occurs in at least once every 5 years, as we've experienced, and that's certainly what we see this year. If you make the calculation between now and the end of the year and say, okay, what would be needed to be done to achieve a single year target, clearly, that would be reckless in terms of business support. That being said, we have a strong practice of paying the dividend to our shareholders. And we're very clear that, that requires a certain amount of free cash flow, which needs to be generated during 2022. On leverage, and then I'll hand back to Gilles really to talk about where we consider bolt-on acquisitions. But if you look historically, we've been up to 4, 4.5x net debt to EBITDA. Clearly, if I look at the pipeline today from an acquisition perspective, there is really nothing that drives up the net debt to EBITDA. And anything that we would do would be bolt-on acquisitions and very similar size to what we've done in the past. But maybe I'll just hand back to Gilles to comment on the areas of interest for us.

Yes, Heidi, as we have already stated the areas where we look for, I would say, companies to acquire and, I would say, to join the Givaudan family, it's across multiple dimensions. It's still about the core F&F. You still have some small and midsized players out there. The second dimension has a lot to do with our 2025 strategy, which is very much around those adjacent spaces. You know that -- if I just remind the fact that on the, basically, the food and beverage-related ingredient space, we operate in a market size of, let's say, 15 billion flavors. But we also want to play in the adjacent spaces of health, nutrition and anything that contributes in a positive way to a formulation in food and beverage. And that amounts to, as we -- as a reminder, to another 14 billion, 15 billion of market size. So you've seen the acquisition of DDW at the end of last year. You've seen some of the things we did with Ungerer. That comes, obviously, after Naturex. And they are clearly -- and today, we have only 5% in this 15 billion. So clearly, there are assets out there which are interesting. The question that you're asking is really about also availability because we will remain opportunistic. We have done 20 acquisitions in the last 4 years. We have a great, I think, name and reputation in the way we -- not only we make sense out of an acquisition, but also the way we integrate companies, and that has been very successful so far. So the question is availability. Valuations of companies have gone down. So the question for the owners is, is that the right time actually to sell my company. But yes, we still remain very active and looking at that from a short term but also midterm perspective, building relationships and so forth.

The next question comes from the line of Charles Eden with UBS.

Just one incremental one for me. Obviously, we've seen pricing step up in Q2, and volumes also remain resilient and actually accelerate. Can I just ask how you're thinking about the resilience of these volumes in the second half of the year? I guess we've already seen some U.S. food companies report negative volumes of their quarter to the end of May in recent weeks. And I appreciate that CPG is only about half of your sales, and the category overlap to some of these customers is somewhat limited. But I'd just appreciate your thoughts on the volume trajectory from here given they've remained very resilient in a continual price rise environment.

Yes, certainly. Obviously, we increased prices. Our clients increased prices because many of the categories that they actually acquire, not just [ buy ], not only fragrance, flavors and other ingredients, increased. But yes, we have not seen on our side a slowdown in volumes. Obviously, and you said it a bit in your question, you're only tracking, let's say, now 44% of our sales indirectly by tracking the big clients, our big clients, which report their figures, but you don't see the other 56% of L&R and how they are doing. So that maybe also explains that. At least this 56% are growing 2 or 3x the rate of the large ones. So that's also the natural hedge that we have there. So let's see what's the coming months are going to see in terms of volume development. But today -- to date and in any year actually, it's very -- it's always very difficult to have a precise number on where the volumes are going to grow on the existing business. The only thing that we control in our business is basically what we call the new wins and the new businesses that we win, which actually is the only way to gain market share, by the way. And that on that side, I can only confirm that it's very positive in both divisions, continues to be positive and also explains why in many parts of the business, we are clearly growing very fast. So that's what we can say about how volumes can develop. What's interesting is that volumes have actually accelerated from Q1 to Q2, so not being impacted by any pricing on the client side. And obviously, also something to specify in a way is that when we increase prices, that has actually no effect on the volumes that we sell to our clients. There are no consequences of having increased prices to the volume that we sell to our clients.

The next question comes from the line of Lisa De Neve with Morgan Stanley.

Two questions. First, can I follow up on the M&A question? So you talked about your perspective towards the market. Can you also share some details on how active the M&A market is at the moment? And so in terms of the willingness of companies to potentially divest and what the multiples in the sort of private space look like today given the sort of reduction we've seen -- decline we see in the public markets? And secondly, can you provide some detail on how your price conversations with your customers have been evolving through the first half? Some of your peers as well as some news that we've seen are noting sort of a step-up in sort of resistance to higher prices on the sort of retail end or the customer -- end customer, consumer end. So hence, my question, what are you seeing on the customer front in terms of pricing and resistance?

Well, on the second question and on price, obviously, I can't disclose our pricing conversations with all our clients because, firstly, they are very numerous. And two, I would say that the fact -- the answer is basically in my statement. I can only confirm that essentially, we are fully covered in terms of all the pricing negotiations we have completed with all our clients to recover all the 9% of raw materials costs that we mentioned earlier. So that has been done with more or less difficulties and resistance. But basically, that -- I can confirm this is in the systems going forward. So that means it's concluded in a positive way. Pricing conversations are never easy. So -- and the second thing, as it relates to the pricing up again of our clients to the retail side and so forth, yet we have not seen any slowdown in volumes to them but -- which doesn't mean that some of them have -- are seeing that on an individual basis. So that's really what we see today. On the M&A side, obviously, I would say -- as I mentioned, it's true that there is a bit of a correlation between the number of -- if you look at history, the number of transactions and M&A deals are usually a function of high valuations. And the reverse is also true that when valuations slow down, you have also slowing down in transactions. It doesn't mean that there won't be any M&A opportunities going forward. What's important in terms of valuation is really we have a very, almost strict view on whether to make an acquisition or not, which is very much about 2 principles. One is to make sure that the multiple of buying something is lower than our own multiple. And if it's a higher multiple, there must be very good reasons to do that or very big synergies, and we have never been in this situation because Givaudan has a very high multiple. And the second principle is really to make sure that it's not about earnings per share appreciation. It's not about any of that. We look at value creation through synergies and especially -- well, in the first place, cost synergies, that's given, but also sales synergies. In every of the 20 acquisitions we made, clearly, we have looked at both sides. And I can only confirm that we have created a lot of value with many of them simply by not only delivering on the cost synergies, but accelerating the growth rate of every one of those companies, thinking there all of them is essentially. And so basically, going forward, this discipline, we will continue to have. And this is very much driven by, I would say, a very thorough disciplined thinking process to say, does it really fit Givaudan not -- from all dimensions, the portfolio? Does it make sense for what we do? Do we really see the sales synergies as opposed to dreaming about cross-selling, for example? And so this, I think, has been valuable for us to keep on being disciplined when making an acquisition. So we'll be remaining active. But again, it takes two to tango.

The next question comes from the line of James Targett with Berenberg.

A couple of questions. Firstly, if I could turn to North America. I appreciate the comments you made on comps. But maybe if you could just clarify, firstly, if the supply chain issues are still lingering into Q3, specific ones for North America? And also whether or not you have seen any -- what your shares are like in North America? Are you seeing any change in the competitive environment, I guess, if you're thinking about IFF? And would you hope for North America to be back in positive territory for the second half of the year? Because I think the comp is still relatively demanding in H2 as well. That's my first question on North America. And then my second one, I guess, is really on the Fine Fragrance outlook. Clearly, you had a very strong couple of quarters. Again, obviously, you mentioned the recovery of travel retail. But just any visibility on outlook for H2 for that unit?

So for North America, yes, you mentioned comparables. I would say, when we mentioned -- well, you have 2 sides to the story. There's the supply chain challenges being -- having ingredients and raw materials on time so that you can actually make a fragrance or a flavor and delivering on time to your clients. Obviously, we've encountered a lot of challenges in terms of lead times in the supply chain delays. It's actually slightly improving, and we've seen some slight improvement over the last recent weeks. The other culprit was the labor market. The labor market in North America is very, very tense, and that didn't start 1st of January of this year. It's already in the fourth quarter. So there, it's really about -- and it's true for our industry. It's true for many industries, I believe. And there, it's also why last year, we had to use a lot of temps and had to incur additional production costs in North America. But things are improving gradually in our operations footprint. I don't believe that it's a question of losing market share to anybody because I hear that the issues are a bit the same for everyone because they are a bit external, labor and supply chains. So that's a bit where we are today. So hopefully, we'll get to better grounds in the coming months in North America, especially on the Fragrance Consumer Products side because Fine Fragrance is doing very well, and some other parts of the Taste & Wellbeing is also doing very well. Fine Fragrance. Well, it's a bit -- I would say it's a bit the magic of Fine Fragrances. To give you an outlook for the second half, I think that -- we have -- just to remind, when we were right in the midst of COVID in 2020, all our clients were saying we're going to be back to the 2019 level in '24, '25 maybe. And to everyone's surprise, every -- many [ find those plants ], including ourselves supplying them, were already back to the '19 level in August of 2021 given the formidable rebound that we have seen across the business. And then we -- everybody thought maybe that's going to slow down in '22. And as you can see from the figures, it absolutely did not slow down, at least for us. I don't know about our competitors. It obviously echoes a lot of our Fine Fragrances clients, which are growing very strongly. So will it continue going forward? I don't know. The only thing I can say is that, again, back to the things that we control, the amount of new wins, new businesses is very strong in Fine Fragrances. We have a formidable momentum, which explains last year's figures but also this year's figures. So that's basically what we can say about Fine Fragrances. We have also a very well-hedged portfolio. We are in both prestige Fine Fragrances as well as more, what we call, the mass market, specialty retail fragrances, which is very strong in the U.S. as well as SAMEA, Latin America. So there's a huge diversity of Fine Fragrances, which also helps us navigating those times and really capturing all growth opportunities.