Barry Callebaut Sales Volumes Up 10.6%

22/01/08 Chocolate supplier Barry Callebaut has achieved continued strong sales growth in the first three months of the current fiscal year as sales volumes rose 10.6% to 331,916 metric tonnes – more than three times the growth rate of the global chocolate market. Volumes were driven by a good development of the Food Manufacturers business unit as an increasing number of food manufacturers outsourced their chocolate needs to Barry Callebaut. The Gourmet & Specialties business unit also saw solid growth as demand for premium quality chocolate continued to rise. Sales revenue increased 21.9% to CHF 1,419.4 million.

A part of this increase related to higher raw material prices partly passed on to customers and favorable exchange rate effects, primarily the appreciation of the Euro against the company’s reporting currency, Swiss franc. Adjusted for cocoa price increases and currency effects, sales revenue rose 15.2% in the first three months of fiscal year 2007/08.

Patrick De Maeseneire, CEO of Barry Callebaut, said: “I am very pleased that Barry Callebaut continued on its growth path in the first three months of the current fiscal year. During this period, we have focused on geographic expansion into high-growth markets such as Eastern Europe and Asia. We opened two new factories in Russia and China and acquired production capacity in Japan from Morinaga. In North America, we acquired a cocoa factory near Philadelphia and finalized the sale of the Brach’s candy business. The construction of our new factory in Mexico is well underway. We have clearly strengthened our leadership position, which puts us firmly on track for continued strong growth.”

Region Europe achieved sales volume growth of 11.5% to 240,793 tonnes, driven by increased demand from industrial and artisanal customers. To better capture the growth potential of Eastern European, Barry Callebaut opened a new factory in Chekhov near Moscow, Russia, in September 2007. Sales revenue in Region Europe rose 24.4 % to CHF 1,099.7 million, lifted by a strong performance of premium-category chocolate products. Part of the revenue increase also relates to higher raw material prices and favorable exchange rates.

The Food Manufacturers business unit benefited from increased outsourcing volumes. Deliveries to Nestlé, under the terms of a long-term pan-European supply agreement, began in the second half of 2007. The Gourmet & Specialties business unit recorded good growth in Region Europe, as sales accelerated during the festive season after a slower start at the end of the summer due to an early build up of inventory levels by customers ahead of expected price increases. The business unit saw increased demand for high-end products, helping to drive sales revenue. At the Consumer Products Europe business unit, sales revenue increased slightly, driven by an enlarged private label and branded business.

Sales volumes in Region Americas increased 12.9% to 72,623 tonnes, as an increasing number of North American confectionery companies outsourced chocolate production. New and enlarged production sites in North America have optimized Barry Callebaut’s manufacturing footprint in the region, while the successful sale of the Brach’s candy business allowed the company to focus on its core chocolate business. On a comparable basis revenue in the region rose 16.4% to CHF 236.6 million. Barry Callebaut has started to supply Hershey as part of a long-term outsourcing agreement signed in July 2007. Together with continued good demand from industrial customers in the region, this has resulted in a good development of the Food Manufacturers business unit. A focus on premium and specialty products and a reinforced sales team led to a good development of the Gourmet & Specialties business unit.

Region Asia & Rest of World registered sales volumes of 18,500 tonnes, down 6.6%, as volume growth was affected by the sale of the Chocosen subsidiary in Senegal last year and constrained by production capacity limitations in Asia. Sales revenue in the region grew 7.5% to CHF 83.1 million. Growth in the Asia Pacific region compensated for a weak performance at the Consumer Products Africa division. Volume growth at the Food Manufacturers business unit in Asia was flat due to production capacity constraints. Barry Callebaut’s factory in Singapore was running at full capacity the entire three months as in the past fiscal year and could not entirely cover the fast-rising demand. A new factory near Shanghai, which was inaugurated in January 2008, will allow the company to again grow its volumes. Barry Callebaut finalized an agreement to acquire production capacity in Japan from Morinaga and signed a supply agreement with the company. Sales of Gourmet & Specialties products rose in Asia with strong demand for premium products.

Looking ahead, CEO Patrick De Maeseneire said: “With four major long-term supply agreements spanning three continents, a strengthened presence in high-growth markets and an improved operational footprint, we are on track to continue our strong sales volume performance. As previously mentioned, we expect the cost environment to remain challenging throughout the remainder of fiscal year 2007/08 due to sustained high raw material prices. In addition, consumer sentiment in North America is weakening and is expected to wane in Europe. This may lead to increased price and margin pressure. Nevertheless, we confirm our four-year financial targets for the period 2007/08 through 2010/11, baring any major unforeseen events." These targets are on average: annual top-line growth of 9-11%, EBIT growth of 11-14% and net profit growth of 13- 16%.