Barry Callebaut sells slightly more chocolate in the first quarter
Published: Wednesday, Jan 24th 2024, 08:40
Updated At: Thursday, Jan 25th 2024, 00:59
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Barry Callebaut (BC) sold more chocolate in the first quarter of its fiscal year (September to November) than in the same quarter of the previous year. Sales volume increased by 0.4 percent, as the world's largest chocolate group announced on Wednesday.
In absolute figures, the amount of chocolate sold was just under 581,000 tons. The company thus exceeded the expectations of analysts, who had anticipated an average increase of 0.1 percent.
The company also defied the declining chocolate market, where sales were down 2.7% in the same period of the previous year, according to the figures. However, Barry Callebaut's sales volume in the same period of the previous year was also affected by the salmonella incident at its largest factory in Wieze, Belgium.
Massively higher commodity prices
Meanwhile, sales increased by 6.2 percent to 2.24 billion Swiss francs, significantly more than volumes, although the strong Swiss franc put pressure on sales. In local currency terms, BC would have grown by as much as 14.1 percent. However, higher prices were the main contributor to this growth, as BC passes on a large proportion of higher raw material costs to its customers.
Cocoa beans alone were almost 70% more expensive on average in the reporting period than in the previous year. A smaller harvest in West Africa fueled fears of a supply shortfall.
As the latest data on the cocoa bean harvest in West Africa was weaker than expected, the development of the cocoa price "remains uncertain", according to the company. Barry Callebaut therefore expects "higher working capital requirements across the industry". This is the reason for the CHF 600 million bond issued in January.
In addition to cocoa, sugar was also significantly more expensive in the first quarter, according to the press release. On average, it cost more than 40 percent more than in the same quarter of the previous year. Dairy products also cost around a quarter less in the reporting period than a year earlier.
Western Europe with highest growth
BC performed best in the Western Europe region, where the company sold around a third of its total volume. The sales volume there increased by almost 5 percent, albeit on a low comparative basis due to the incident in Wieze in the previous year.
Western European business was negatively impacted by a reluctance among customers from the fast-moving consumer goods (FMCG) sector. As people tend to save money when shopping in stores at the moment, these customers also produced fewer products. This means that Barry Callebaut was able to supply less chocolate to coat snacks such as chocolate bars, for example. On the other hand, consumer demand for retailers' own brands increased, which benefited BC.
By contrast, the second-largest region, North America, where BC sold around a quarter of the total volume, was unable to grow. Sales volumes there fell by 4 percent, but less sharply than the market as a whole, according to BC. Food manufacturers in the region suffered from weaker consumer demand. However, this was partially offset by higher new business. There were also signs of recovery in the Gourmet & Specialties segment.
There were also volume declines in the two smaller regions of Latin America and Asia, Middle East and Africa, and BC also sold less in the cocoa trading business Global Cocoa. On the other hand, BC grew in Central and Eastern Europe.
Outlook for financial year confirmed
In the press release, CEO Peter Feld is optimistic about the progress of the restructuring program for the year as a whole. "We are making good progress with the implementation of BC Next Level. We have introduced our new operating model, the new management team has been appointed and the majority of the planned measures have already been initiated," he is quoted as saying.
In the press release, Barry Callebaut confirms the targets it announced in November. Accordingly, sales volumes at constant exchange rates are expected to be roughly the same as in the previous year. By comparison, the figure at that time was 2.281 million tons. The operating result adjusted for one-off restructuring measures as part of the "BC Next Level" program and reported in local currencies is also expected to remain constant (EBIT 2022/23: CHF 659.4 million).
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