Barry Callebaut lowers sales volume guidance after ‘flat to modest’ growth

Peter Feld who succeeds Boone, who is stepping down for personal reasons​, was unveiled at the Group’s Media and Analysts Conference Call to discuss its 2022-23 Half-Year Results where it forecasts full-year volume growth to be ‘flat to modest’.

The Group said the sales volumes decline moderated in the second quarter, slowing to -0.5%, from -5.1% in the previous quarter and revenue grew 3.7% to 4.2 billion Swiss francs ($4.64 billion) as the company managed to pass higher raw material costs to customers, it stated

"Today's news is unlikely to reassure investors​," Vontobel analyst Jean-Philippe Bertschy told Reuters. “The 2023 guidance reset was not surprising but the magnitude of the downward revision is significant​.”

The Group, reported strong profitability and progressive volume recoverywith sales volume of 1,130,742 tonnes in the first six months of fiscal year 2022-23 (ended February 28, 2023). Following a slow start in the first quarter (-5.1%) due to the residual effects from the temporary shutdown of its Wieze factory in Belgium because of a salmonella outbreak in June 2022. Volume progressively recovered in the second quarter (-0.5%), resulting in a volume decline of -2.9% in the first half year.

Chocolate volume picked up in the second quarter in Region EMEA (+1.8%, Half Year -3.7%) and remained about stable in Region Asia Pacific (+0.4%, Half Year +0.3%). Volume declined in Region Americas (-6.6%, Half Year -4.4%).

The Group said overall chocolate volume in the first six months declined (-3.6%). Excluding the Wieze ramp-up effect, volume performance was in line with the underlying global chocolate confectionery market (-1.8%)4. Global Cocoa volume normalized and amounted to 227,773 tonnes, flat (-0.1%) compared to prior-year period.

Sales revenue amounted to CHF 4,180.7 million, up +7.9% in local currencies (+3.7% in CHF). The increase was driven by higher raw material prices and the inflationary environment, which Barry Callebaut manages through its cost-plus pricing model for the majority of its business, and by the positive product mix.

“In the first six months of the fiscal year, we delivered strong profitability, reflecting the strength of our business model, which includes continued cost leadership in a highly inflationary environment, and good product mix. Against a high comparator, we witnessed progressive volume recovery, albeit slower than expected. This was due to the temporarily limited availability of our global brands and weaker than expected customer demand in an inflationary environment. I want to thank all colleagues for their commitment and passion in driving the business forward​,” said Ben De Schryver, CFO of the Barry Callebaut Group.

Strategic milestones

Innovation​: Barry Callebaut presented in January 2023 the top chocolate trends for 2023 and beyond and its global brand Cacao Barry launched the Cacao Powders collection, a range of high performance cocoa powders for chocolatiers and pastry chefs, with improved texture, colour and taste.

In March 2023, Barry Callebaut's 2nd generation chocolate was recognized as a finalist in four categories of the World Food Innovation Awards at the 2023 International Food & Drink Event in London. The breakthrough innovation allows chocolate lovers to indulge in the purity of cocoa flavours. The new Dark and Milk chocolates are based on a new product design, which follows the principle 'cocoa first, sugar last' and only contain these two ingredients, plus dairy in the case of Milk chocolate.

Cost Leadership​: In January 2023, Moody's Investors Service changed the Group’s long-term issuer rating outlook to ‘positive’ from ‘stable’. The rating outlook for all senior unsecured long-term bonds issued by Barry Callebaut Services N.V. has also been changed to ‘positive’ from ‘stable’. At the same time, Moody’s affirmed the ‘Baa3’ ratings. Moody's justified the rating action with its expectation of a further strengthening of Barry Callebaut's credit metrics over the next 12 to 18 months.

Sustainability​: In March 2023, Barry Callebaut announced a long-term agroforestry project with Nestlé in Côte d’Ivoire. The project aims to roll out 11,500 hectares of agroforestry, which includes payments for ecosystem services to more than 6,000 farmers. The recently signed agreement is an important milestone in Barry Callebaut's journey to scale its agroforestry approach by partnering with customers across cocoa origins, thus creating value for the farmers and removing carbon within Barry Callebaut's and its customers' supply chains.

In the call with media and analysts, new CEO Peter Feld reaffirmed Barry Callebaut’s commitment to its sustainability projects and said he was looking forward to working closely with the team.

Looking ahead, Schryver said: “We are confident to deliver continued strong operating profitability in the second half of the year. Due to the delayed volume growth, we now forecast the volume growth to be flat to modest for the Full Year 2022/23. Over the three years guidance period we expect average volume growth to be below 5% with EBIT strongly outperforming​.”