Lindt & Sprüngli continues to grow faster than the markets

Chocoladefabriken Lindt & Sprüngli AG, Kilchberg, has made a good start to the financial year 2011 in a challenging economic environment, and has already recorded notable increases, significantly above the market average, in terms of both sales and profits during the first six months. During the first half of 2011, and following a brief recovery from the previous worldwide financial and economic crisis, some European countries, as well as the USA, became increasingly affected by problems associated with excessive levels of debt and currency issues. The negative effects of these rather parlous developments and the savings measures and tax increases introduced by the governments of the most affected countries had an impact on spending power, and, by implication, on consumer mood. In addition, the raw material prices, which were largely driven by speculation, put an additional strain on the position of manufacturers.

Whereas most chocolate markets as a whole recorded rather modest growth in terms of value of around 3% during the first half of 2011, growth in terms of volume remained relatively flat almost everywhere. This makes it all the more pleasing to see that the majority of Lindt & Sprüngli subsidiaries grew faster than the markets and thereby contributed to the positive half-yearly results. The LINDT brand was further strengthened in all countries, acquiring market shares in most cases.Particularly good progress was made in the important main European markets of Germany, France, and Italy, as well as by LINDT and GHIRARDELLI in North America. Lindt & Sprüngli also recorded solid growth in Switzerland. Only the UK subsidiary failed to meet expectations, given the especially difficult economic climate.The start of May 2011 saw the establishment of a subsidiary in South Africa; a clear sign that the Group is forging ahead with its geographical expansion.

The spread of discount chains means competition is increasingly price-focused. As a consequence of this, manufacturers are more and more under pressure in terms of the conditions imposed by their trade partners. The market is becoming dominated by increasingly aggressive promotional activities. In line with the consistent positioning of LINDT as a premium brand, the company is firmly adhering to its existing pricing policy and is only involved in such activities to a very limited extent. The increased costs of raw materials, namely for our key raw material, cocoa beans, are expected to remain extremely volatile on a high niveau. Thanks to efficiency improvement programs and excellent cost management, the Group always looks to absorb these costs as far as possible.

As at June 30, 2011, Lindt & Sprüngli has achieved Group sales of CHF 1.007 bn. This represents significant organic growth in local currencies of 6.1% compared with the same, very strong period in the previous year. This pleasing increase, however, was reduced by a total of 10.8 percentage points as a result of negative currency-related impacts, and resulted in a decrease of 4.7% after conversion into Swiss francs. Organic growth was mainly achieved by increases in volume and improvements to the product mix, as well as selective price increases in some markets. As ever, the launch of new and successful products played a decisive role in this, providing further proof that Lindt & Sprüngli is at the forefront of innovation. Operating profit (EBIT) for the first half of 2011 stands at CHF 42 m. This equates to an increase of 23.9% to CHF 33.9 m compared with the same period for 2010. At CHF 32.1 m, net income is even 29.4% higher than last year’s value. The cash flow situation is even better. As at the end of June 2011, the company has net liquidity of CHF 593 m, an increase of CHF 147 m on the first half of the previous year (CHF 446 m).

By creating an “Extended Group Management” the course was set in March 2011 for the acceleration of ongoing geographical expansion of the Group. The share buy-back program agreed by the Board of Directors was implemented as planned in May of this year. Until the end of 2012, a maximum of 5% of the share and participation capital is to be bought back via separate SIX Swiss Exchange trading lines. As at 30 June 2011, securities to the value of CHF 31 million have been procured.

Despite the considerable ongoing uncertainties besetting the worldwide financial and economic environment, Lindt & Sprüngli adheres to the strategic sales and profit targets announced in March 2011 and expects organic growth in local currencies of 6 to 8% as well as an increase in the operating profit margin of 20 to 40 base points for the full year 2011. The focus here remains on the acquisition of market shares in key markets and the geographical expansion into growth markets. Even given the background volatility in terms of raw materials and currencies, Lindt & Sprüngli will stick to its proven “premium” strategy and maintain a high level of advertising activity throughout the second half of the year.

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