Barry Callebaut issues confident outlook for 2019 and beyond after announcing sales growth

Barry Callebaut has reported a steady start to the fiscal year, with sales rising in the three months to November 30 2018 and says it is on track to deliver on mid-term guidance ending with fiscal year 2018/19. The company also issued new guidance for the three-year period to 2021/22 that matches its prior mid-term view for 4 to 6% volume growth.

The company reports that revenue increased 3.7% in local currencies, to 1.9 billion Swiss francs ($1.91 billion).

Sales volume was up +1.7% on top of a very strong prior-year base of +8.0%, supported by growth in the US (up 8%) and the Asia Pacific regions (up 3.8%). Growth in Europe, the Middle East and Africa was relatively flat (down 0.1%) following a boom in volume during the same period the previous year (up 10.3%).

Deals

The Swiss-based chocolate producer said it expected volumes in Europe to accelerate throughout the year, after signing a number of deals in 2018.

At the close of the year, Barry Callebaut completed the transaction with Burton’s Biscuit Company in the UK, one of Europe’s largest chocolate confectionery markets. The transaction, which includes a long-term annual supply agreement of over 12,000 tonnes of chocolate and compound, that started late last year in addition to the acquisition of additional production capacities in the UK.

Barry Callebaut and Garudafood also extended their existing supply partnership in Indonesia in November and signed a long-term agreement for the supply of an additional 7,000 tonnes of compound per year, starting mid-2019.

And, its agreement to acquire Inforum, a leading Russian B2B producer of chocolate, coatings and fillings is expected to be finalized soon, and will strengthen Barry Callebaut’s presence in the high-growth Russian market, the world’s second largest chocolate confectionery market.

On the innovation front, one year after the launch of Barry Callebaut’s Ruby Chocolate in KitKat, Nestlé has recently added it to its premium range of chocolate “Les recettes de l’atelier”. Ruby chocolate is already available in 40 countries worldwide, the company says.

Finally, Barry Callebaut launched its CHOCOLATE ACADEMY Online, the world’s first e-learning platform for chocolate professionals, in November 2018.

On track

“As anticipated in November, we had a steady start to the new fiscal year on top of a very strong prior-year base. We expect sales momentum to pick up in the back half of the fiscal year as additional volumes come on stream from new outsourcing contracts across all regions, as well as from recently launched innovations. Our good product mix and strong portfolio give us confidence that we are on track to deliver on our current mid-term guidance for the period ending with fiscal year 2018/19​,” said Antoine de Saint-Affrique, CEO of the Barry Callebaut Group.

In the announcement to the business press, Barry Callebaut predicted 4-6% volume growth for the year ahead, with earnings before taxes and amortisation expected to be above volume growth in local currencies on average.

Alain Oberhuber, consumer goods analyst and CEO of MainFirst Schweiz AG, said: “We upgrade Barry Callebaut, because its earnings visibility will improve in the next quarters as: 1) more outsourcing and new signed contracts will accelerate volume growth; 2) the firepower has increased; 3) the base will become favorable in H2-19E; 4) the combined ratio remains at a healthy level; 5) raw material prices have recently declined, and 6) valuation multiples are at an attractive level.”​

Barry callebaut will announce more details on its growth strategy and business model at its Investor Day on April 16 in Wieze, Belgium.