Lindt & Sprüngli reports organic growth of 0.2 percent

Against the background of an increasingly widespread economic downturn, Lindt & Sprüngli remained on course in the first half of 2009 and confirms the growth and profit guidance for 2009 announced previously in March 2009. As declared with the announcement of the annual financial statements for 2008, and in accordance with the accounting trend among consumer goods manufacturers, as well as the expectation of a future alignment of IFRS accounting principles with US GAAP, a change in revenue recognition was put into effect for the first half of 2009; commercial payments for services rendered in the shape of listing fees, advertising, second placements and commercial cooperations (trade promotions) are offset against sales with effect from January 1, 2009 and no longer shown as operating expenses. This change involves a reduction of 11.7% in the published half-year sales for the previous year, but has no influence on the net income and balance sheet of the company.

At the end of June 2009, Group organic growth in local currency terms increased by 0.2% against the same period last year. Because of the weakness of certain important currencies such as the EUR, GBP, CAD and AUD, sometimes running into high double-digit figures, and despite a slight strengthening of the US dollar, consolidated sales in Swiss franc terms reached a total of CHF 979 million (-5.4%) in the first six months of the year. The economic circumstances lead most trade partners to reduce their stocks; consequently, offtake rates exceeded effective sales of Lindt & Sprüngli. This resulted in market share gains for LINDT.

Because of the difficult global economic situation, price increases attributable to rising cocoa prices were only partly passed on, so that the higher raw material costs and negative currency influences could not be fully compensated. However, the company's sales performance clearly shows that demand for innovative, high quality and trustworthy products also remains strong in an adverse market environment and, thanks to its premium strategy, the company's competitiveness continues intact even under the most challenging conditions.

The operating profit (EBIT), excluding the special charges already announced in March 2009, amounts to CHF 24.1 million (same period previous year CHF 33.6 million). This decline is explained by higher material costs, adverse currency exchange factors and slightly higher depreciation, which could only be compensated in part by optimization of the operating and personnel costs as well as by efficiency increases. The special charges are related to LINDT retail outlet closures in the USA (CHF 14.7 million) and to an impairment of the warehouse building in Italy (CHF 7.5 million), and amounted to a total of CHF 22.2 million in the first half of 2009.

After considering these special charges, the operating profit (EBIT) amounted to CHF 1.9 million. The restructuring measures which have been taken, combined with the uncompromising premium positioning and the tenacious pursuit of Lindt & Sprüngli's successful business model based on quality, brand image and innovation, will continue to strengthen the competitiveness and market position of the Group and ensure that it is favorably placed to take advantage of the future economic upturn.

Provided that the global economy continues to stabilize, albeit very slowly, in the second half of 2009 and that the swine flu pandemic does not reach drastic levels, Lindt & Sprüngli is maintaining its sales and profit guidance announced in March 2009 with growth between 2 and 5%, respectively an operating profit (EBIT) of between CHF 260 and CHF 280 million for the year 2009 as a whole. Lindt & Sprüngli is convinced that its market-focused growth strategy gives it a unique opportunity, especially in these economically challenging times, to further enhance its position in the premium chocolate segment and, by doing so, lay the groundwork for profitable long-term growth.

When analyzing the Group's semi-annual earnings, it is important to bear in mind the seasonal and gift-oriented nature of the premium chocolate business: the Lindt & Sprüngli Group makes less than 40% of its annual sales during the first half of each year, but at the end of June these sales are charged with around half of the fixed costs of production, administration and marketing. This means that the profitability of the Lindt & Sprüngli Group in relation to sales in the first half of the year cannot be equated with its profitability over the year as a whole.

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