Barry Callebaut full-year profits have fallen slightly after it made significant investments in its supply chain as factories in developed markets reached capacity.
Callebaut CEO Juergen Steinemann said: “Some factories in developed markets were at capacity and this was creating inefficiencies,”
The company expanded nine factories during the year and also spent big on sustainable cocoa initiatives, which dragged operating profit down 2.5% on last year to CHF 353m ($376m).
Sales grew 8.3% to 4.8bn ($5.1bn), while sales volume rose by almost 9% to 1.4 m tons. Callebaut said this growth was driven by its main business, the Food Manufacturers Products business, and long-term partnership agreements.
No limit for outsourcing
Callebaut has outsourcing deals with big firms including Nestlé, Hershey and Mondelez International and secured deals with Unilever, Arcor in Chile, Morinaga in Japan and Grupo Bimbo in Mexico during the financial year.
New factories are planned in Chile and Japan through the agreements and Callebaut will also up capacity in Mexico.
“The potential for outsourcing is big. I don’t see any limit to further outsourcing,” said Steinemann.
Asked during a media conference if Barry Callebaut could secure outsourcing deals with premium players such as Lindt, Steinemann said: “I am convinced we can convince.”
The company spent CHF 5m ($5.3m) during the year on its ‘Spring’ project, an initiative to improve customer dealings mainly in Western Europe.
In September Callebaut ended its consumer goods activities by selling its factory in Dijon, France, to startup company Chocolaterie de Bourgogne which contributed to yearly discontinued operations costs of CHF 98.5m ($105m).
The company also incurred charges from it sustainable cocoa program, Cocoa Horizons. It plans to invest CHF 40m ($42.6m) in the initiative in next 10 years with a focus on farmer training in West Africa.
Barry Callebaut’s global sourcing and cocoa business was worst affected by investment costs as operating profit in the segment fell 16% to CHF 65.2m ($69.2m).
Europe profits hit by charges
Barry Callebaut suffered in Europe, its biggest market, but performed well in developing markets in the Americas and Asia Pacific.
The overall European chocolate market grew 1.4% during the period with slight declines in Western Europe, according to data from Nielsen
Barry Callebaut said it was hit by outsourcing agreements costs and higher factory and supply chain charges in Europe, which saw it suffer a 5.1% operating loss to CHF 232.2m ($247m) in the market.
Brazil and Asia deliver
The US is another developed chocolate market waning, but Callebaut was able to capitalize on growth in the emerging Brazilian market by doubling volumes in Brazil to help operating profit in the Americas grow 26% to CHF 90.2m ($96m)
The company also grew volumes in Asia-Pacific by 10% while operating profit was upped 19% to CHF 29.7m ($31.6m). Callebaut said it was investing in capacity expansion at all its Asia-Pacific sites.
Callebaut is also in the process of developing a strategy for Eastern Europe, the Middle East and Africa, focusing on ‘aggressive growth’ in Russia.
It is also hoping to build its presence in Turkey and announced last week plans for a new factory in Central Anatolia, to be closer to potential customers.
Callebaut has forecast 6-8% volume and operating profit growth until 2014/15,
“Our main priority for the next fiscal year is to finalize the various investments in capacities and structures,” said Steinemann.
“Other priorities are managing our continued growth through long-term partnerships, Gourmet and emerging markets as well as further increasing our operational efficiency with project “Spring” in Western Europe,” he said.
Callebaut’s chief financial officer Victor Balli, said of the cocoa crop in the Ivory Coast and Ghana: “We do not see a bad crop, but it’s not going to be a bumper crop like in the past two years.”