Barry Callebaut: Cuts Forecast as Market Shrinks

Zurich / CH. (bc) Barry Callebaut AG the world´s leading manufacturer of high-quality cocoa and chocolate products, again delivered strong top-line and bottom-line growth in an exceptionally difficult economic environment in fiscal year 2008/2009 (ended August 31). In sharp contrast to the global chocolate market, which contracted by more than two percent in volume in 2008/2009, Barry Callebaut succeeded in growing its sales volume by 4,1 percent. Highlights:

• Sales volume up 4,1 percent in a declining global chocolate market
• Accelerating volume growth in the second half of the fiscal year: plus 8,7 percent
• Sales revenue up 8,5 percent in local currencies (plus 1,3 percent in CHF)
• Operating profit (EBIT) up 9,5 percent in local currencies (plus 2,8 percent in CHF)
• Net profit up 18,5 percent in local currencies (plus 10,4 percent in CHF)
• Proposal of a capital repayment of 12,50 CHF per share; up 8,7 percent compared to prior year
• Three-year financial targets for the period 2009/2010 through 2011/12: on average six to eight percent volume growth and average EBIT growth at least in line with volume growth

The company attributes its growth to three factors: its early expansion into emerging and high-growth markets, the implementation of outsourcing deals, and market share gains. The strength of the company´s reporting currency, the Swiss Franc (CHF), compared to most other currencies had a negative impact on sales revenue, operating profit (EBIT) and net profit for the year. In local currencies, sales revenue grew by 8,5 percent and came in at 4’880,2 million CHF (or plus 1,3 percent in CHF). Based on considerable operational improvements as well as tight cost savings programs, and despite the effect of the anticipated lower combined cocoa ratio1, operating profit (EBIT) increased by 9,5 percent in local currencies. In Swiss Francs, the increase was 2,8 percent to 350,8 million CHF. Net profit for the year went up 18,5 percent in local currencies; in CHF terms, it grew strongly by 10,4 percent to 226,9 million CHF.

Juergen B. Steinemann, CEO of Barry Callebaut: «I am pleased that we were able to deliver strong top-line and bottom-line growth in the face of a rarely seen global chocolate consumption decline. After reaching a low in winter 2008, growth resumed and regained momentum in the second half of the year. Our growth strategy based on the three pillars of geographic expansion, innovation and cost leadership, coupled with our robust business model, our diversified product offering and ongoing efficiency improvement initiatives, clearly stood the test of the global economic recession. In this context we took further significant steps such as expanding to new markets (in example Mexico), implementing new outsourcing deals (such as Morinaga in Japan) and adding new capabilities (in example a new pastry factory in Spain). We reconfirm our strategic focus on industrial and artisanal customers. We will continue to build upon this strategy in the coming years while also achieving further synergies across our businesses and completing the integration of recent acquisitions».

Market environment

For the first time in more than a decade the global chocolate market declined by more than two percent in volume terms. However, it showed a slight increase in revenue because of price mark-ups effected in early 2008 in the wake of peak raw material and energy costs. Further challenges included adverse currency effects and a strong destocking by customers toward the end of 2008 in anticipation of a potential decrease in chocolate consumption and to alleviate their balance sheets. The country-to-country developments were far from uniform. Market data shows that chocolate consumption in the top eight Western European chocolate markets dropped by 2,6 percent (in volume) between September 2008 and July 2009, driven primarily by the U.K., France and Spain. Eastern Europe showed a single-digit increase in volume but turned negative towards the end of the period. In the U.S., the decrease in consumption was 6,6 percent according to the same market data from Nielsen. As a result of the economic situation chocolate consumption in China also declined by 10,9 percent. Other emerging markets, such as Poland, Türkiye and Brazil, continued to grow in volume.

Info: The complete press release «Barry Callebaut reports full-year results for fiscal year 2008/09 ended August 31, 2009: Delivering strong top-line and bottom-line growth» is available in English, German, French.