Divisional Overview

The Fragrance Division recorded sales of CHF 1,988 million, an increase of 10.5% in local currencies and 9.0% in Swiss francs. After a
double-digit performance in the first half year, sales continued to show a strong growth in the second half on top of stronger comparables.

Text Version, Opens in a new windowTotal sales for Fragrance compounds (Fine Fragrances and Consumer Products combined) increased 10.5% in local currencies and 9.0% in Swiss francs to CHF 1,719 million from CHF 1,576 million.

Fragrance Ingredients sales increased by 10.7% in local currencies thanks to an overall high level of demand, notably for specialities. All three business units performed very well in 2010. Particularly Fine Fragrances, which was affected by the reduction of inventories last year, rebounded strongly with an annual sales growth of 18.3%. The less cyclical Consumer Products business delivered an increase in sales of 8.3%. A certain element of restocking has been seen in both Fine Fragrances and Fragrance Ingredients sales.

EBITDA increased to CHF 398 million from CHF 333 million last year. In comparable terms, EBITDA increased to
CHF 445 million from CHF 370 million reported last year. Favourable product mix due to higher sales in Fine Fragrances and a good utilisation of capacities due to higher production volumes across all business units helped to increase the gross profit margin. The EBITDA margin on a comparable basis increased to 22.4% compared to the 20.3% of last year.

The operating income increased by 25.1% to CHF 239 million from CHF 191 million last year due to a higher gross profit and stable operating expenses. The operating margin on a comparable basis increased to 14.9% from 12.5% reported last year, mainly as a result of higher gross margin and overall cost absorption. Operating income on a comparable basis was
CHF 297 million, above the CHF 228 million reported last year.

The new multi-purpose manufacturing unit in Pedro Escobedo, completed in November 2009, became fully operational early in 2010 and helped meet the recent increase in demand for fragrance ingredients. In October, the closure of our compounding facility in Argenteuil was completed and its products are now being produced in Ashford, UK and Vernier, Switzerland. The fragrance ingredients site in Naarden, the Netherlands, is planned to cease its activities fully by 2012 and first product transfers to other productions sites have already started.

The new Fragrance Creative Centre in São Paulo, Brazil, was officially opened in October 2010. This centre houses both the regional Fine Fragrances and Consumer Product teams with Perfumery, Applications laboratories and the latest evaluation facilities for Air care, Household, Fabric and Personal care. The new facility doubles the size of the current unit and offers the teams better capabilities in creation, application and technology to meet growing demand in Brazil and elsewhere in Latin America.

SAP was successfully implemented in Brazil, Argentina, Colombia and in the ingredients manufacturing sites of Mexico and Spain.