Barry Callebaut: “smart growth” getting traction

Amid a global chocolate confectionery market, which declined by 1.7% (source Nielsen: - 1.7% in volume for the period September 2015 - August 2016), sales volume growth in the chocolate business, including both Food Manufacturers and Gourmet, was strong and volume rose by 7.6%. According to the company, all three key growth drivers contributed to this positive development, led by Gourmet & Specialties which grew 12.4%, but Outsourcing and Emerging Markets also supported the Group’s volume increase. In Global Cocoa, less profitable contracts were intentionally phased out, which led to a decline of 12.0% in volume for the full year.

Antoine de Saint-Affrique, CEO of the Barry Callebaut Group, said: “I am pleased to see that our focus on `smart growth`, which is a balance between volume growth, enhanced profitability and free cash flow generation, starts to get traction. We delivered strong growth in our chocolate business across all Regions, supported by our three key growth drivers and despite a sluggish global chocolate confectionery market. In our Global Cocoa business, we deliberately phased out less profitable contracts. Good profitability in our chocolate business was offset by a challenging cocoa products market, as anticipated. We also see the results of our increasing focus on free cash flow generation.”

Sales revenue was up 8.8% in local currencies (+ 7.0% in CHF) to CHF 6.677 bn, partly driven by a better product mix and overall higher sales prices over the entire fiscal year (Barry Callebaut passes on raw material prices to customers for the majority of its business). Gross profit increased by 4.4% in local currencies (+ 1.9% in CHF) and came in at CHF 863.2 m. This is the result of the strong margin development in the chocolate business due to the company’s greater focus on margins, including product and customer mix, bolstered by the strong growth of the Gourmet & Specialties business. These positive effects outweighed the negative impact from the historically low combined cocoa ratio. Operating profit (EBIT) was basically flat in local currencies at 0.1% (- 3.2% in CHF) and amounted to CHF 401.7 m.

As anticipated, this year’s profitability was affected by the challenging cocoa products market, but also by restructuring costs related to the manufacturing footprint and a negative currency translation effect. Overall the Group’s EBIT per tonne decreased by 2.0% in local currencies (- 5.2% in CHF). Net profit for the year decreased by 5.1% in local currencies to CHF 219.0 m (- 8.7% in CHF). This is a reflection of a higher tax rate and one-off costs related to issuing a new bond in spring 2016.