Barry Callebaut reports full-year results for fiscal year 2008/09 ended August 31, 2009

November 12, 2009

Ad hoc announcement pursuant to Art. 53 LR

Group key figures for fiscal year 2008/09

	Change vs 2007/08
		2008/09	Reporting currency	Local currencies
Sales volume	mt	1,213,610	4.1%
Sales revenue	CHF m	4,880.2	1.3%	8.5%
Operating profit (EBIT)	CHF m	350.8	2.8%	9.5%
EBIT/Tonne	CHF	289.1	-1.2%	5.2%
Net profit for the year	CHF m	226.9	10.4%	18.5%

Market environment

For the first time in more than a decade the global chocolate market declined by more than 2%* in volume terms. However, it showed a slight increase in revenue because of price mark-ups effected in early 2008 in the wake of peak raw material and energy costs. Further challenges included adverse currency effects and a strong destocking by customers toward the end of 2008 in anticipation of a potential decrease in chocolate consumption and to alleviate their balance sheets.

The country-to-country developments were far from uniform. Market data* shows that chocolate consumption in the top eight Western European chocolate markets dropped by 2.6% (in volume) between September 2008 and July 2009, driven primarily by the U.K., France and Spain. Eastern Europe showed a single-digit increase in volume but turned negative towards the end of the period. In the U.S., the decrease in consumption was 6.6% according to the same market data*. As a result of the economic situation chocolate consumption in China also declined by 10.9%*. Other emerging markets, such as Poland, Turkey and Brazil, continued to grow in volume.

*Source: Nielsen Sept 2008-July 2009

Value generation and stable financing situation

In the year under review, capital expenditure was CHF 144.4 million, a reduction of over 40% versus the exceptionally high amount of CHF 249.9 million spent in the previous year to finance Barry Callebaut’s global expansion. Return on invested capital (ROIC) remained stable at 13.9% (prior year: 14.0%). The economic value added (EVA) increased from CHF 126.3 million to CHF 129.9 million.

Barry Callebaut has solid long-term committed financing facilities of EUR 1.2 billion (approximately CHF 1.9 billion) with an average tenor of 6.1 years. With a net debtposition of CHF 942.7 million as per August 31, 2009, Barry Callebaut still has significant financial leeway.

Overview of performance by region in fiscal year 2008/09

Region Europe – Successfully navigating through the recession

While Barry Callebaut’s sales volume in Europe showed a decline in the first half of the fiscal year, in line with the negative market trends in key chocolate countries, such as France, Belgium, Italy and Spain, it rebounded strongly by 8% in the second half. Overall, sales volume for Region Europe came in at 792,385 tonnes, up 0.7%. Sales revenue was boosted on one hand by higher cocoa bean prices and price increases effected a year ago, and negatively affected on the other hand by adverse currency effects and lower prices for sugar and milk powder. Sales revenue reached CHF 3,335.8 million, a decrease of 5.5% (or +3.6% in local currencies). Operating profit (EBIT) benefited from the favorable impact of focusing on higher-margin products as well as tight cost control, and rose by 6.7% to CHF 296.2 million (or +14.6% in local currencies).

The Food Manufacturers business unit faced the double challenge of a decline in consumer spending and a general industry destocking. The economic crisis arrived later in Eastern Europe than in Western Europe, but it had a greater impact. Several Eastern European currencies have lost around 20% of their value versus the euro and the Swiss franc. After the lows of the second quarter in Western Europe, the business unit regained its growth momentum and benefited from revived strong customer demand in a number of markets, such as the UK, Germany and the Netherlands. Sustained double-digit sales growth in Eastern Europe, particularly in Poland, partly compensated for the slowdown in Western Europe.

Most of the Gourmet markets across Europe were hit by the recession. In contrast, Poland performed very well, as did Turkey. While the HORECA (hotels, restaurants, catering) segment, including the food service distributors, experienced a severe drop in sales as a result of reduced restaurant spending, the bakery/pastry and confectionery segments proved more resilient. As a result of a balanced customer and geographic mix, the Gourmet & Specialties business unit managed to maintain its sales in local currencies at the prior-year level, and even gained market share. The group’s first pastry manufacturing plant, inaugurated in October 2008 in Alicante, Spain, successfully started production and sales of ready-to-serve quality desserts in response to the growing need of the home-service segment and HORECA customers for quality convenience products. The acquisition of IBC in Belgium in September 2008 expanded the company’s range of chocolate decorations. The Beverages division, which supplies beverage mixes for vending machines, was impacted by lower demand from consumers for vending products. However, overall the division clearly outperformed the market. To further strengthen its position in the consolidating European chocolate and cappuccino vending mix market, Barry Callebaut acquired the very complementary Danish vending mix specialist Eurogran in June 2009.

A key trend in all major European markets was the price pressure in response to the growing cost-consciousness of consumers. These developments benefited Barry Callebaut’s Consumer Products business unit, which was able to grow the sales of its medium-priced local brands as well as of private label products and had a good year. Despite this satisfactory development, Barry Callebaut’s decision to divest the consumer products business remains unchanged.

Region Americas – Market share gains in a declining market

Barry Callebaut’s footprint expansion across North America has been fully completed with the start-up of its new chocolate factory in Monterrey, Mexico, which was inaugurated in January 2009, and the opening of a Chocolate Academy in Chicago in September 2008.

Region Americas experienced an overall sales volume growth of 10.0% to 321,852 tonnes. This growth was driven by additional deliveries to Hershey’s under a long-term supply contract signed in 2007, some early returns from the company’s geographic expansion to Mexico and South America, and new business gains with food manufacturers. Sales revenue increased by 23.0% to CHF 1,145.8 million as a result of higher sales volumes and higher cocoa bean prices. Operating profit (EBIT) rose by 15.0% to CHF 91.4 million (+16.4% in local currencies). Due to higher sales volume, the beneficial product mix (in the Food Manufacturers business unit), lower non-cocoa raw material prices, and strong cost controls, the region was able to more than offset declining profitability in the Gourmet & Specialties business unit.

The Food Manufacturers business unit was the driver of the region’s volume growth, based on the following four factors: First, the continuing implementation of the supply agreement with The Hershey Company; second, increased at-home consumption; third, market share gains with large Key Accounts; and fourth, the addition of many new regional customers. Consumers generally traded down to cheaper products. However, there is a growing appetite for value-added functional chocolate products. Barry Callebaut sold to customers the first probiotic and the first high antioxidant chocolates available in the U.S. market.

The economic environment for the Gourmet & Specialties business unit was strained as restaurant traffic was adversely impacted by the recession, particularly in fine dining restaurants, which experienced traffic declines of 10%. The general belief in the industry is that traffic declines have bottomed out, but no one expects a rapid recovery. The economic crisis led to a shift from imported European Gourmet products to more locally made value-for-money Gourmet products. Sales could be maintained at the prior-year level. With consumers eating more often at home, the sales focus on the key bakery segment was increased.

Region Asia-Pacific and Rest of World – Well positioned for further growth

Barry Callebaut’s sales volume grew 14.6% to 99,373 tonnes, as a result of the geographic expansion and organic growth. Sales revenue rose by 12.8% to CHF 398.6 million (+15.8% in local currencies). Operating profit decreased by 36.0% to CHF 33.1 million, strongly affected by changes in scope and high start-up costs for the new factories.

While initially targeting international food companies, the Food Manufacturers business unit is increasingly gaining business from large local food manufacturers. Volumes grew at a double-digit rate despite the melamine milk powder scandal in China, which impeded exports from China for several months, although Barry Callebaut’s products were always safe. The growth was partly due to the geographic expansion to China, Malaysia and Japan, partly to the strong growth of Key Accounts in New Zealand, South Africa, Malaysia and Japan.

Themain target customer segment of the Gourmet & Specialties business unit for imported European Gourmet products, the HORECA (hotels, restaurants, catering) sector, was hit hard in 2009 as most hotels posted less than 50% occupancy rates. In this price-sensitive market, the locally made Gourmet products fared better. In the second half of the fiscal year, the imported European products resumed growth again.

Key figures by region for fiscal year 2008/09

*EUROPE*		Change (%)	*12 months up to* *Aug 31, 2009*	12 months up to Aug 31, 2008
Sales volume	mt	0.7	*792,385*	786,698
Sales revenue	CHF m	-5.5	*3,335.8*	3,530.5
EBITDA	CHF m	3.7	*369.7*	356.5
Operating profit (EBIT)	CHF m	6.7	*296.2*	277.6

*AMERICAS*		Change (%)	*12 months up to* *Aug 31, 2009*	12 months up to Aug 31, 2008
Sales volume	mt	10.0	*321,852*	292,614
Sales revenue	CHF m	23.0	*1,145.8*	931.6
EBITDA	CHF m	16.2	*109.7*	94.4
Operating profit (EBIT)	CHF m	15.0	*91.4*	79.5

*ASIA/RoW*		Change (%)	*12 months up to* *Aug 31, 2009*	12 months up to Aug 31, 2008
Sales volume	mt	14.6	*99,373*	86,695
Sales revenue	CHF m	12.8	*398.6*	353.3
EBITDA	CHF m	-26.0	*41.6*	56.2
Operating profit (EBIT)	CHF m	-36.0	*33.1*	51.7

Development of business segments in fiscal year 2008/09

Industrial business segment: Benefiting from Key Accounts as well as local food processors
The Industrial business segment focuses on selling cocoa and chocolate products to industrial food processors and consumer goods manufacturers worldwide. It consists of the Cocoa and the Food Manufacturers business units.

Semi-finished products sold to third-party customers at the Cocoa business unit significantly increased, driven by the company’s newly acquired entity in Malaysia and the expansion of existing factories. As global chocolate consumption declined and existing stocks were high, demand for additional cocoa butter collapsed and the combined cocoa ratio¹ dropped sharply from October 2008 until March 2009, stabilizing at a low level. This resulted in margin pressure for semi-finished products, which will continue during the coming months. The Food Manufacturers business unit benefited from the existing outsourcing contracts, high demand from Key Accounts as well as local food processors, primarily in North America, Eastern Europe and Asia-Pacific.

Food Service/Retail business segment: Shift from restaurant consumption to at-home eating
The Food Service/Retail business segment serves a broad range of customers, from local craftsmen (such as chocolatiers, pastry chefs, bakers, hotels, restaurants, caterers) to global retailers. It consists of the Gourmet & Specialties and the Consumer Products business units.

Due to a combination of the economic crisis affecting overall consumption, especially restaurant spending, and the financial crisis, forcing customers to reduce their inventories, the Gourmet & Specialties business faced a challenging market in 2008/09, especially in the first half. With consumers eating more often at home, there was a shift in the product mix from HORECA to products for the bakery/pastry segment. The business unit managed to almost maintain its sales volume at prior-year level. Amidst growing demand from consumers across all major European markets for price-competitive chocolate products, the Consumer Products business unit was able to grow sales of its medium-priced local brands as well as of private label products and had a good year with a sales revenue growth of 2.4%, adjusted for scope and currencies. Overall sales revenue, though, showed a decline because of the divestment of various consumer activities.

Key figures per business segment for fiscal year 2008/09

*INDUSTRIAL*		Change (%)	*12 months up to* *Aug 31, 2009*	12 months up to Aug 31, 2008
Sales volume	mt	7.4	*979,051*	911,819
Sales revenue	CHF m	5.8	*3,447.0*	3,258.3
EBITDA	CHF m	5.1	*319.9*	304.4
Operating profit (EBIT)	CHF m	3.0	*254.5*	247.1

*FOOD SERVICE/* *RETAIL*		Change (%)	*12 months up to* *Aug 31, 2009*	12 months up to Aug 31, 2008
Sales revenue	CHF m	-8.0	*1,433.2*	1,557.1
EBITDA	CHF m	-0.7	*201.2*	202.7
Operating profit (EBIT)	CHF m	2.8	*166.2*	161.7

Executive Committee established

In alignment with the company’s growth strategy, Barry Callebaut has appointed an Executive Committee that will replace the former Senior Management Team. Members are the following senior executives: Juergen B. Steinemann (CEO), Victor Balli (CFO), Massimo Garavaglia (President Western Europe), Dave Johnson (President Americas), Steven Retzlaff (President Global Sourcing & Cocoa), Dirk Poelman, Chief Operations Officer, and Hans Vriens, Chief Innovation Officer.

Outlook

Looking ahead, CEO Juergen B. Steinemann said: “Our strategic focus going forward remains on expanding our core activities with industrial and Gourmet customers. Based on our existing growth strategy, we see a lot of potential to grow through further outsourcing agreements with industrial customers and to further expand in emerging territories on the basis of our recent and future investments. Our Gourmet business is also key to our strategy. We expect the economic environment to remain challenging and volatile. For the three-year period 2009/10 through 2011/12, we therefore target on average 6-8% volume growth per annum and average EBIT growth at least in line with volume growth. In the current fiscal year 2009/10, operating profit (EBIT) will be affected by the unfavorable combined cocoa ratio but we expect to deliver strong net profit growth (PAT) again. With our three-year financial targets we will continue to significantly outperform the global chocolate market – as always barring any major unforeseen events and based on local currencies.”

Proposals to the Annual General Meeting

Par value reduction in lieu of a dividend
The Board of Directors proposes to the Annual General Meeting of December 8, 2009 to increase the repayment to shareholders by 8.7%, from CHF 11.50 to CHF 12.50 per share, representing a payout ratio of 28.5%. Instead of a dividend payment, the Board of Directors proposes to reduce the share capital of the company through the reduction of the par value per share from CHF 50.70 to CHF 38.20.The par value reduction of CHF 12.50 will be paid out to shareholders in March 2010.

Board of Directors
All Board members will stand for re-election for another term of office of one year.

1 The “combined cocoa ratio” is the combined sales price for cocoa butter and cocoa powder relative to the cocoa bean price

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Barry Callebaut:
With annual sales of about CHF 4.9 billion for fiscal year 2008/09, Zurich-based Barry Callebaut is the world’s leading manufacturer of high-quality cocoa and chocolate – from the cocoa bean to the finished product on the store shelf. Barry Callebaut is present in 26 countries, operates about 40 production facilities and employs about 7,500 people. The company serves the entire food industry, from food manufacturers to professional users of chocolate (such as chocolatiers, pastry chefs or bakers), to global retailers. Barry Callebaut is the global leader in cocoa and chocolate innovations and provides a comprehensive range of services in the fields of product development, processing, training and marketing. The company is actively engaged in initiatives and projects that contribute to a more sustainable cocoa supply chain.