Callebaut: sales up, profits down

7 Nov 2016

Barry Callebaut has announced its full year financial results. Sales volume was up +2.2%, reflecting above-market performance of the chocolate business (+7.6%), and sales revenue was up +8.8% - but net profit was down -5.1%.

Callebaut: sales up, profits down

Barry Callebaut has announced its full year financial results. Sales volume was up +2.2%, reflecting above-market performance of the chocolate business (+7.6%) and intentional phase-out of less profitable contracts in cocoa products (-12%). Sales revenue was CHF 6.7 billion, up +8.8% in local currencies (+7.0% in CHF). However, operating profit (EBIT) was temporarily affected by challenging cocoa products market as anticipated: +0.1% in local currencies (-3.2% in CHF). Net profit was down -5.1% in local currencies (-8.7% in CHF).

“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,” said Antoine de Saint-Affrique, CEO of the Barry Callebaut Group. “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.”

In fiscal year 2015/16 (ended August 31, 2016) the Barry Callebaut Group – the world’s leading manufacturer of chocolate and cocoa products – increased its sales volume by +2.2% to reach 1,834,224 tonnes. Amid a global chocolate confectionery market, which declined by -1.7%, sales volume growth in the chocolate business, including both Food Manufacturers and Gourmet, was strong and volume rose by +7.6%. 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. Sales revenue was up +8.8% in local currencies (+7.0% in CHF) to CHF 6,676.8 million, partly driven by a better product mix and overall higher sales prices over the entire fiscal year.

Gross profit increased by +4.4% in local currencies (+1.9% in CHF) and came in at CHF 863.2 million. 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 million. 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 million (–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.

“We will continue to focus on the further implementation of our “smart growth” strategy,” said de Saint-Affrique. “We have good visibility on volume growth and expect to see a positive contribution to profitability from our Cocoa Leadership project, supported by some recent recovery in the cocoa products market. On this basis, we confirm our three-year guidance: On average 4-6% volume growth and EBIT growth in local currencies on average above volume growth.”