Lindt & Sprüngli is back on its long-standing road to success

Chocoladefabriken Lindt & Sprüngli AG achieved in 2010 in a slowly recovering market environment above-average organic growth of 7.3% in local currency terms, which resulted in substantial market share gains in practically all countries and segments. Despite the negative currency factors, EBIT was 22.8% higher, while the EBIT margin improved to 12.6% (previous year 10.5%). The increase in the net profit is still more apparent with a gain of 25.3%. The Board of Directors has decided to execute, until the end of 2012, a share buyback program for maximum 5% of the total Lindt & Sprüngli Registered Share/Participation Certificate (PC) capital currently recorded in the Commercial Register.

With the creation of an 'Extended Group Management' Chocoladefabriken Lindt & Sprüngli AG is strengthening the Group's organizational structure. Against the background of widespread economic recovery and improved consumer sentiment, the overall chocolate markets remained somewhat subdued in terms of volumes, and in some cases even declined. During the period of global recession, consumers had tended to move over to more low priced private labels; however, as the upturn set in so the demand for high-quality products returned. This development also had positive impacts on Lindt & Sprüngli's group sales, which reported strong organic growth of 7.3% at CHF 2.579 billion, with corresponding market share gains practically everywhere. Because of negative currency factors, growth in Swiss francs stood at 2.2%.

All the subsidiary companies, except for Australia, achieved faster growth than the market average and therefore contributed to the good result. The leaders were the two important North American markets (USA and Canada with the LINDT and GHIRARDELLI brands), together with Great Britain, Europe's biggest chocolate market, where double-digit growth was achieved. But in countries like Italy, Spain, France and Germany, too, which had been hit by the economic crisis and the accompanying weaker consumer sentiment in 2009, Lindt & Sprüngli achieved substantial growth rates. Even on the highly competitive Swiss domestic market, Lindt & Sprüngli managed to consolidate its leading position and further increase its market shares. Although sales in Australia fell short of expectations overall, the concept of the 'LINDT Chocolat Cafés' continued its highly satisfactory development, and the opening of further cafés is planned.

Despite the weak euro and US dollar, and some massive increases in commodity prices, the success of the pre-economic crisis years was resumed in terms of profitability, too, with a much higher operating profit than in the previous year of CHF 325.3 million (+22.8%), and a substantial improvement in the EBIT-margin of 12.6% (previous year 10.5%). At CHF 241.9 million, the net profit was even better with an increase of 25.3% on the previous year and a return on sales of 9.4% (previous year 7.6%). These good results are in line with the forecasts already announced by Lindt & Sprüngli in the spring of 2010, and show that the structural measures and adjustments made in the last two years were able, as expected, to create a new dynamic so as to benefit from the incipient upturn. The corporate balance sheet remains perfectly healthy and reflects a strong position. At the end of 2010, the equity ratio and net cash flow of the business stood at 66.2% and CHF 540 million respectively.

In the year under review, the major investment project to expand the US production site in Stratham, NH was successfully completed after four years' work. The plant now has all the facilities needed to handle every single production step from cocoa bean processing to the finished and packed product on site, and is no longer dependent on cocoa mass imports. This also optimizes currency risks and transport costs. In addition, substantial investments were made to enter new markets, including the incorporation of a subsidiary company in Japan, as well as further expansion of the global network of own boutiques and 'LINDT Chocolat Cafés'.

The recovery of the world economy and improvement of consumer sentiment are expected to continue in the current financial year. However, the unstable commodity market situation, especially for cocoa, is likely to persist because of political unrest in the Ivory Coast, the biggest cocoa producer. The trend of prices for other raw materials, such as milk, sugar and nuts, also remains hard to predict. With a full pipeline of new ideas and innovative products, Lindt & Sprüngli is perfectly placed to achieve further growth and strengthen its position as world leader in the premium chocolate segment. In 2011, the focus will once again be placed on market share gains on the key markets in which Lindt & Sprüngli operates. In addition, geographical expansion into the new growth markets will continue.

For the financial year 2011, the company expects organic growth of 6-8% and an improvement in its operating results (EBIT) of 8-10%, consistent with the Group's long-term strategic objectives. Against the background of particularly strong sales growth in the first half of 2010, the growth rate in the first six months of the current year will, however, remain at the lower edge of the forecast range for the year as a whole. However, this temporary setback will be made good in the second half. In view of the reported sales and profit growth, the Board of Directors will be proposing to the forthcoming Shareholders' Meeting, on April 28, 2011, the payment of a dividend of CHF 450.- per registered share (previous year: CHF 400.-) and of CHF 45.- per participation certificate (previous year: CHF 40.-). This represents a 12.5% increase on the previous year.

The Board of Directors of Chocoladefabriken Lindt & Sprüngli AG has decided to execute a share buyback program for Lindt & Sprüngli Registered Shares and Participation Certificates (PC's) until the end of 2012. Shares and Participation Certificates of up to a maximum of 5% of the total Share/PC capital currently recorded in the Commercial Register will be repurchased via a separate trading lines on SIX Swiss Exchange, less Swiss withholding tax and retired by means of a capital reduction. Based on the closing price of Lindt & Sprüngli Registered Shares and Participation Certificates on March 14th, the value of the shares/PC's to be bought back is approximately CHF 310 million. At the same time Lindt & Sprüngli will continue to pursue its present dividend policy.

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