Callebaut targets growth of chocolate market

Barry Callebaut is looking to expand its operations Keystone

The world's largest chocolate maker, Switzerland's Barry Callebaut, has posted a nine per cent rise in its full-year profit to SFr207 million ($179.4 million).

The group said on Tuesday that it was raising its mid-term goals despite high commodity prices.

Patrick De Maeseneire, Barry Callebaut’s chief executive, said the company grew “more than twice as fast as the global chocolate market”, and will continue to do so.

Because of a write-down on the sale of its United States Brach’s Candy unit, profit actually fell by nearly a third to SFr124.1 million, well below analysts’ expectations. The business is being sold to allow the company to focus on its core operations and should generate a one-off loss of SFr83 million.

Operating profit rose 9.8 per cent to SFr324 million, despite a negative impact of approximately SFr30 million on the operating result of higher cocoa prices.

However, Barry Callebaut remains optimistic about the future.

“Our cost environment will remain challenging amid high raw material prices, but we have responded to these pressures by optimising our cost structure and increasing sales prices,” the group said in a statement.

The company has raised its targets for the four-year period to 2010-2011. It is now aiming for annual top-line growth up to 11 per cent, operating income growth of between 11 and 14 per cent and a net profit increase of anywhere up to 16 per cent.

“Given commodity prices, the underlying result is solid. We like the long-term story but the financial targets might not be enough for some,” Landsbanki Kepler analyst Jon Cox told Reuters.

Barry Callebaut has won contracts from Nestlé, Hershey and Cadbury this year, as companies outsource the production of chocolate amid soaring prices for ingredients such as cocoa and milk.

Growth

The group said it was facing accelerated growth, with the acquisition or construction of additional production capacities in western Europe, Russia, North America, China and Japan.

In Asia and the rest of the world, the company has bolstered its presence in what it calls “key target markets”, and a new factory is being built in Suzhou, China.

A Chocolate Academy will also be opened along with a sales office in Mumbai, India later this year.

And an alliance with Japanese confectioner Morinaga consisting of a long-term supply agreement and the acquisition of production equipment should be finalised by the end of the year.

The group provides the food manufacturing industry with cocoa and chocolate products, fillings, coatings and cocoa powders and has over 1,650 recipes.

swissinfo with agencies

Key facts

Key figures 2006/2007 :
Sales volume: +8.5% to 1,059,200 tonnes
Sales revenue: +10.6% to SFr4,106.8 million
Operating profit (EBIT): +9.8% to SFr324.0 million
Net profit from continuing operations: +9.1% to SFr207 million

In brief

Zurich-based Barry Callebaut is the world’s leading manufacturer of cocoa, chocolate and confectionary products – from the cocoa bean to the finished product.

It is present in 24 countries, operates more than 390 production facilities and employs approximately 8,000 people.

The company serves food manufacturers and professional users of chocolate (such as chocolatiers, pastry chefs or bakers).

Going up

Chocolate prices could rise ten per cent early next year, following political unrest in Ivory Coast and lower-than-average cocoa harvests, which declined eight per cent on average this year.

Cocoa prices in London rose above £1,100 (SFr2,627) per ton in July, the highest level in four years, having gained nearly 30 per cent since January. Current prices are around £950.

Other cost factors are pushing up chocolate prices: the value of powdered milk has more than doubled, while packaging elements such as paper and aluminium have also become more expensive.

Lindt & Sprüngli expects its prices to rise six to ten per cent, the first rise in four years.

Nestlé also plans an increase, but this will vary depending on the country. Barry Callebaut reckons its prices could rise by as much as 15 per cent.