Barry Callebaut, the world’s biggest maker of bulk chocolate, lowered its mid-term production forecast and said this financial year will be challenging due to high cocoa prices.
Volume will rise 4 per cent to 6 per cent annually on average over the three years through August 2018, the Zurich-based company said in a statement on Wednesday. The company had been forecasting annual growth of 6 per cent to 8 per cent in past years. The stock fell as much as 6.3 per cent.
Antoine de Saint-Affrique, who became chief executive officer 1 Octover, said this year will be “challenging.” Cocoa futures have gained 17 per cent in the past year and El Nino may cut supply further, according to Bloomberg Intelligence analyst Thomas Jastrzab. Barry Callebaut, which supplies Unilever with chocolate for its Magnum ice cream brand, also faces a headwind from the strength of the franc, which reduces the value of its sales from abroad.
“Barry Callebaut published a mixed bag of results,” wrote Alain-Sebastian Oberhuber, an analyst at MainFirst Bank. “The new CEO announced new and more realistic targets.”
Earnings before interest and taxes fell 0.3 perc ent to 415 million Swiss francs ($418 million) in the 12 months through August. Analysts expected 419 million francs, according to the average of estimates compiled by Bloomberg.
Growth in Ebit will exceed volume, excluding currency shifts, in the three years through August 2018, the company also forecast. De Saint-Affrique said the global confectionery market may grow 1.8 per cent a year in the long-term.
“Historically, we assumed market growth of 2 percent to 3 percent, and now we probably see a somewhat lower rate of the underlying market for the next five years," Chief Financial Officer Victor Balli said on a conference call. The company aims to boost profitability as it reduces its volume targets, he said. “It may be more intelligent to adjust growth to a level where profitability can follow more rapidly."
The company said will close a factory in Thailand by the end of January and is reducing production capacity for cocoa grinding in Malaysia.
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