DAVY VIEW

The value-add ingredients sector has a long history of managing input cost inflation. Givaudan’s expectation of 9% input cost inflation for 2022 is well above historic norms but not unprecedented (15% in 2011). We model an under-recovery of input cost inflation in FY22, which drives a 6.8% cut to our underlying EBITDA forecast. We expect Givaudan to fully recover inflation via price increases by end-FY23 — we view any inflation-led margin dislocation as temporary. We remain bullish on the structural growth prospects for the sector and its ability to manage inflation and, as such, we retain our ‘Outperform’ rating.