Barry Callebaut Reports Strong Profit Growth in Half-Year Results

03 Apr 2014 --- Chocolate and cocoa specialist Barry Callebaut has reported a 3.1% increase in sales volume, driven by emerging markets and outsourcing. Its two Gourmet brands, Callebaut and Cacao Barry also helped drive business while the two flat sectors were developments in Western Europe and Global Cocoa.

“I am pleased with our half-year results,” said CEO Juergen Steinemann. “The growth has been particularly strong in emerging markets, with outsourcing and partnership agreements, as well as with our global Gourmet brands. The profitability increased significantly thanks to strong margin improvements, a good EBIT development of our stand-alone business as well as of the acquired cocoa activities. I am particularly satisfied with the integration of the acquired business, which is already delivering synergies and contributing to profit."

Speaking to Food Ingredients First, a spokesman for the company explained that emerging markets is one of the company’s specific key growth areas for the future, as well as outsourcing and gourmet. “And yes, we want to increase growth in emerging markets as we see attracting potential there, for both our chocolate and cocoa products.”

The spokesman also confirmed growth in the company’s two Gourmet brands, Callebaut and Cacao Barry, which increased in volume terms by 10%. “This growth is down to two reasons: One is that we are focusing on accelerating our growth in the Gourmet area (ie we are increasing our sales and marketing efforts, including areas such as increased points of sales). The other reason is that there is a trend towards luxury products in that segment.”

Higher average raw material prices compared to prior year translated into higher sales revenue. Gross profits for the company were up 18% to CHF 421.6m. An improvement in profits was achieved by a better product mix and higher product margins, according to the company.

Looking forward Steinemann said: "We continue to focus on profitable growth based upon our four pillar strategy. Furthermore, we proceed to work towards the full integration of the acquired cocoa business. Achieving all identified synergies will remain our top priority. We confirm our mid-term targets2 as well as the expected EBIT contribution of about CHF 30 million from the acquired cocoa business for this fiscal year."

The European chocolate confectionery market grew 2.0%. In Western Europe, growth was +1.3%, while markets in Eastern Europe increased by 3.6%. In Western Europe, the company continued to focus on optimizing customer and product segmentation, further improving product margins and eliminating capacity shortages. Sales volume declined slightly due to more selective sales in the second quarter. The good growth in the Gourmet business was largely supported by the Callebaut brand, which gained market share in almost every market. The Beverages division performed well.

In the EEMEA region, the industrial business recorded very strong growth, mainly in Russia, Turkey and the Middle East. Also the Gourmet business showed robust growth, in particular in Russia.

The chocolate confectionery market in the Americas grew 3.5%. North America increased by 2.7%, markets in South America expanded 9.2%. Chocolate markets across Asia-Pacific expanded at a slightly slower pace although Barry Callebaut grew its sales volume in this area by 11%.

The acquisition of the cocoa business from Petra Foods was the main growth driver in the segment Global Cocoa: Sales volume went up 80.1% to 245,811 tonnes. Stand-alone, sales volume increased 1.0% to 137,866 tonnes, reflecting selective sales to third-party customers, some volume transfers to the acquired cocoa factories in Europe as well as increased internal consumption.

Due to lower powder prices versus the prior year, the segment's total sales revenue grew at a slower pace than volume: It increased by 65.3% to CHF 859.8 million.

The acquired cocoa business from Petra Foods already contributed to Global Cocoa's operating profit (EBIT): Total EBIT rose 72.2% to CHF 34.1 million; operating profit from the acquired cocoa business was at CHF 12.9 million. Stand-alone EBIT increased by 7.3% to CHF 21.2 million, impacted by the still rather weak combined cocoa ratio.

The integration of the acquired cocoa business from Petra Foods continues as planned. The expected contribution to the Group's operating profit (EBIT) of around CHF 30 million in the first year of its full consolidation is confirmed.

Prices on the world sugar market continued their downward trend due to a market surplus and investment funds taking short positions. Market prices reached their lowest levels since June 2010. Concerns of a drought in Brazil led to a recent price recovery. European sugar prices continued to drop as a result of previous special measures to increase supply.

Global milk production was very good and sufficient to meet the increased demand, mainly coming from China. Both world and European market prices for milk powder stabilized at high levels. A sustained regular demand from the industry, which overall was short covered, kept prices high.

by Sonya Hook