Swiss fragrance and flavor maker Givaudan is preparing price increases to offset a big hike in raw material costs that will mean lower profitability over the next few months.

“The increase in raw material prices has been very sharp over the last two months,” Chief Executive Gilles Andrier told Reuters in an interview following the group’s annual results.

“We expect high single-digit to low double-digit price increases in raw materials this year,” he said, adding this rise would be offset by increasing selling prices, which should be implemented within 3-6 months. Andrier also said profitability would be hit over the next 3-6 months and noted that it was hard to predict how this would develop for the full year.

The company that makes fragrances used in upmarket perfumes such as Dior and Prada proposed a lower-than-expected dividend payout for 2010, which disappointed investors.

Givaudan shares, which have already lost over 5 percent so far this year, were trading 3.6 percent lower at 1118 GMT, making the group the worst performer in a 0.7 percent lower STOXX Europe 600 Chemicals index .SX4P.

“In the first half, the company faces very strong growth comparables and headwind from raw material prices. Therefore we confirm our Hold rating,” Vontobel analyst Claudia Lenz said.