Lindt & Sprüngli breaks the 5 billion Swiss franc sales mark
Published: Tuesday, Jan 16th 2024, 09:20
Updated At: Wednesday, Jan 17th 2024, 00:59
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Last year, chocolate manufacturer Lindt & Sprüngli exceeded the CHF 5 billion mark in sales for the first time. The company is sticking to its long-term target for the current financial year.
The Kilchberg-based chocolate manufacturer sold products such as Lindor balls, pralines and chocolate bunnies worth 5.20 billion Swiss francs in 2023, as announced on Tuesday. In organic terms, i.e. excluding currency effects and acquisitions, this corresponds to an increase of 10.3 percent. One negative factor, however, was the strong Swiss franc: In local currency, sales were up by just 4.6 percent.
Higher cocoa prices
The company's double-digit organic growth is mainly due to the fact that it has asked its customers to pay more for its chocolate products. "Most of the growth is due to price increases as a result of higher raw material prices," it explains.
According to Lindt, the price of cocoa "almost doubled" over the course of the year. In fact, the commodity rose by over 60 percent last year on the commodity markets in New York and by almost 80 percent in London. For the first time in 45 years, over 4,000 US dollars were paid for a ton of the coveted beans. The reasons for this included bad weather and the spread of tree diseases in the most important growing region of West Africa.
According to an earlier UBS assessment, however, Lindt has an advantage over other manufacturers: in the premium segment in which the Swiss manufacturer operates, customers will continue to buy chocolate even if it becomes more expensive.
Lindt & Sprüngli itself confirms this assessment in the press release: while sales prices have risen, sales volumes have increased rather than decreased. At the same time, volume sales in the global chocolate market have shrunk slightly. "It shows that customers remain loyal to Lindt & Sprüngli despite price increases," the company says with conviction.
Double-digit growth again in North America
The company from the left bank of Lake Zurich attributes the increase in sales to the rise in tourism, among other things. More people have visited Lindt's stores, which are located at airports and tourist boulevards, among other places. Online sales of Lindt chocolate have also continued to grow after the pandemic.
In addition, all regions recorded strong growth. In Europe, the largest region (accounting for almost 50 percent of sales), organic growth amounted to 9.1 percent. Double-digit sales growth was achieved in Switzerland, Italy, the UK and Eastern Europe, for example. "Solid growth" is reported for the important markets of Germany and France.
The second-largest region, North America, also grew significantly by 11 percent (sales contribution of a good 40 percent). All subsidiaries - including the Russell Stover brand, which had previously struggled - reported "strong growth" compared to the previous year.
Analysts had previously expected lower growth rates for both Europe and North America than Lindt has now achieved. In contrast, growth in the "Rest of the World" was slightly below expectations at 12.9 percent (AWP consensus: 13.1 percent). However, the management emphasizes in the press release that the strongest growth was recorded in this region. With a turnover of 0.68 billion, this business accounted for a good 13% of Group turnover, with Australia reportedly being the country with the highest turnover.
Low taxes will boost profits
Lindt & Sprüngli has not yet announced its profit figures. They will be published together with the annual results in the spring. However, the company states in the press release that it is confident of achieving an EBIT margin of around 15.5 percent. This is at the upper end of the previously targeted margin of 15.3 to 15.5 percent.
In terms of net profit, the management expects "a significant, one-off positive effect, which will lead to a one-off tax rate of less than 15 percent", according to the press release. The reason for this is the introduction of global minimum taxation and the "Tax Reform and AHV Financing" (STAF) bill in Switzerland.
This positive effect will have no impact on free cash flow in the 2023 financial year. According to a presentation published with the half-year results last July, the tax rate is expected to normalize again to around 23 to 25 percent.
Meanwhile, the company confirms its outlook for the current year. Those responsible see sales growth of 6 to 8 percent and an improvement in the operating profit margin of 20 and 40 basis points. The company is therefore expected to develop in line with its medium-term targets.
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