Despite lackluster Q1 volumes, Barry Callebaut expects sales to pick up in second half

23 Jan 2019 --- Swiss chocolate-maker Barry Callebaut is relying on accelerated sales momentum for the coming year, after its first-quarter volumes inched up by just 1.7 percent, slightly short of expectations. Fiscal Q1 sales volume rose to 541 million tons, according to the company’s statement, while revenue in the first three months increased by 3.7 percent in local currencies, to CHF 1.9 billion (US$1.91 billion), in line with forecasts.

The company also notes that recent outsourcing deals such as British biscuit maker Burton’s would help sales volumes rise later in the year, keeping it on track to meet its mid-term guidance for 4 to 6 percent volume growth, on average, over the period 2015/16 to 2018/19.

In December 2018, Barry Callebaut completed the transaction to acquire Burton’s Biscuit Company’s chocolate manufacturing assets in the UK. The acquisition followed the cocoa giant signing an agreement with the UK’s second biggest biscuit manufacturer, for the long-term supply of more than 12,000 tons of chocolate and compound per year in September 2018. The deal came just a few months before the UK is set to leave the EU.

“We expect sales momentum to pick up in the back half of the fiscal year as additional volumes come on stream from new outsourcing contracts across all regions, as well as from recently launched innovations,” Antoine de Saint-Affrique, CEO of Barry Callebaut said, following the results announcement.

“As anticipated in November, we had a steady start to the new fiscal year on top of a solid prior-year base. Our good product mix and strong portfolio give us confidence that we are on track to deliver on our current mid-term guidance for the period ending with fiscal year 2018/19,” he explains.

Barry Callebaut also issued new guidance for the three-year period to 2021/22, targeting a 4 to 6 percent increase in sales volumes with a higher increase in earnings before interest and taxes, in local currencies.

The company also reported that it is on track to deliver on current mid-term guidance ending with fiscal year 2018/19.

Volume growth was supported by Regions Americas (+8.0 percent) and Asia Pacific (+3.8 percent). Region EMEA posted stable volumes (-0.1 percent) in the first quarter, following a double-digit volume growth of +10.3 percent in the same prior year quarter, and the company expects an acceleration in the coming quarters from recently signed outsourcing deals, such as Burton’s. Barry Callebaut’s sales revenue amounted to CHF 1,881.4 million, an increase of +3.7 percent in local currencies (+0.5 percent in CHF), outpacing volumes mainly due to a better product mix.

Looking ahead, de Saint-Affrique notes: “Our results in the past three years have confirmed the strength of our ‘smart growth’ strategy. Going forward, we remain committed to achieving consistent, above-market volume growth and enhanced profitability. A continuing outsourcing trend, as evidenced by recently signed agreements, the dynamic growth in emerging markets, our attractive Gourmet business as well as our innovation power provide plenty of levers for further growth.”

“All these elements give us the confidence to issue new mid-term guidance, consistent with our prior mid-term guidance, which is 4-6 percent volume growth and EBIT above volume growth in local currencies on average for the three year period 2019/20 to 2021/22, barring any significant unforeseeable events.”

Expansion: In November 2018, Barry Callebaut and Garudafood extended their existing supply partnership in Indonesia, the world’s fourth most populous country, and signed a long-term agreement for the supply of an additional 7,000 tons of compound per year, coming on stream as of mid-2019.

In October 2018, Barry Callebaut signed an agreement to acquire Inforum, a leading Russian B2B producer of chocolate, coatings and fillings. This strategic acquisition, which is expected to be closed shortly, will strengthen Barry Callebaut’s presence in the high-growth Russian market.

Innovation: Following the successful integration of Gertrude Hawk Ingredients (GHI), Barry Callebaut is now leveraging GHI’s unique portfolio of decoration and inclusion products with existing and new customers.

Sustainability: Barry Callebaut published its 2017/18 Forever Chocolate progress report on December 7, 2018. Highlights include that Barry Callebaut sourced 44 percent of its cocoa and also 44 percent of all other raw materials from sustainable sources.

In November 2018, a strategic partnership was announced between Barry Callebaut, Tony Chocolonely and Albert Heijn, the biggest retailer in the Netherlands, to expand fully traceable, sustainable cocoa sourcing, which is an essential move to making sustainable chocolate the industry norm by 2025.