Swiss chocolate maker Barry Callebaut posted annual profit growth as it managed to pass on surging cocoa prices to customers, but said it expects a second straight year of flat sales volumes as prices of the key ingredient remain high.
The firm said in a statement there was 'significant uncertainty on how cocoa-related price increases will impact short-term demand', adding that it would defend its market share in a challenging environment.
Cocoa Prices
Cocoa bean prices hit an all-time high of about $12,540 per metric tonne in April and have almost doubled in the last 12 months to November.
That has hurt Barry's cash flow, which stood at minus CHF 2.3 billion (-€2.5 billion) for the year to end-August and caused it to borrow CHF 2 billion (€2.13 billion), tripling its net debt.
"The rocketing net debt is a concern and unlikely to be resolved quickly," Vontobel analyst Jean-Philippe Bertschy said.
But the chocolate maker managed to pass on higher costs to customers, with annual revenue rising 22.6% to CHF 10.4 billion and recurring operating profit, adjusted for one-off items, up 6.8% to CHF 704.4 million (€748.8 million).
However, with one-offs and restructuring costs included, profit fell by a third to CHF 446.1 million (€474.22 million).
First Positive Effects
Barry Callebaut is seeing the first positive effects of its two-year savings plan launched last year, aimed to save CHF 250 million (€265.8 million) annually. According to the plan, the company has shut plants in Germany and Malaysia, and intends to close one in Italy.
"BC remains a huge construction project and the pressure from the high cocoa bean price is not abating," Bertschy said, adding that he is surprised by the resilience of the business in the tough market.
Its chocolate sales volumes were unchanged at 2.279 million tonnes by the end of the company's fiscal year in August, just under a company-compiled consensus of 2.283 million tonnes.
Volumes fell 1.2% in the fourth quarter, hit by weaker sales for the company's high-end gourmet unit and a temporary production halt at its Mexican plant in August.
