Barry Callebaut – Full-year results, fiscal year 2012/13

• Accelerated, strong volume growth in a challenging market environment: +8.7% stand- alone¹ (+11.4% incl. the recently acquired cocoa business)
•  Operating profit (EBIT) gaining momentum¹: +4.4% stand-alone thanks to improved margins, partly offset by combined cocoa ratio impact (total EBIT: -3.9%²)
• Integration of the acquired cocoa business in progress; synergy potential confirmed
• Mid-term financial targets confirmed³
• Proposed payout to shareholders of CHF 14.50 per share, payout ratio of 35%

Juergen Steinemann, CEO of Barry Callebaut, said: “I am proud of the excellent volume growth we have achieved, notably with strategic partnership agreements, in emerging markets and in our Gourmet business. This growth is even more remarkable against the background of a challenging market environment in some regions. Equally, I am pleased that our product margins further improved and profitability gained momentum in a period when we significantly invested in structures and processes. The integration of our newly acquired cocoa business is progressing well and I am happy to confirm the synergy potential announced earlier.” 

Group key figures for fiscal year 2012/13 – for the total business 

In the past fiscal year 2012/13 (ended August 31, 2013), Barry Callebaut – the world’s leading manufacturer of high-quality chocolate and cocoa products – strongly increased its sales volume by 11.4% to 1,535,662 tonnes. Excluding the recently acquired cocoa business, the Group accelerated the pace of its volume growth in the second half to +8.7% for the full year. This growth, which was considerably above the global market⁴, was achieved in a partly challenging economic environment. All Regions and Product Groups contributed to this exceptional growth.

Sales revenue was +0.6% in local currencies (+1.1% in CHF) and came in at CHF 4,884.1 million. On a stand-alone basis, sales revenue decreased by 1.9% in local currencies (-1.5% in CHF) to CHF 4,756.4 million. This reflects the lower average raw material prices compared to the prior year.⁵
Gross profit: Product margins further improved across all Regions and Product Groups in the second half of the fiscal year. The negative impact from the combined cocoa ratio slowed in the second half, but was still apparent. Capacity constraints due to the strong volume growth led to additional factory and supply chain costs. Gross profit increased by 8.1% in local currencies (+8.3% in CHF) to CHF 728.5 million. Stand-alone gross profit was +9.3% in local currencies (+9.6% in CHF) at CHF 737.0 million.
On a stand-alone basis, operating profit (EBIT) gained momentum with a solid increase of 4.2% in local currencies (+4.4% in CHF) to CHF 368.8 million, supported by the good performance of Gourmet, partly offset by some (one-off) costs and selective investments in structures and processes. Total EBIT declined by 4.0% in local currencies (-3.9% in CHF) to CHF 339.6 million, impacted by one-off costs related to the acquisition of the cocoa business from Petra Foods and the expected operational loss of this business.
Total net profit for the year from continuing operations was 5.4% lower in local currencies (-4.9% in CHF) at CHF 229.3 million, resulting from the lower total EBIT.

Outlook – Maintaining growth pace and further improving profitability

CEO Juergen Steinemann on the outlook: “Based on the visibility on our business, I am confident that we will be able to maintain our fast growth pace. We will continue to focus on further improving our margins and profitability. The integration of the newly acquired cocoa business, together with the realization of the identified synergies, will be given top priority. We confirm our guidance⁶.”

Strategic milestones in fiscal year 2012/13

• Barry Callebaut closed the acquisition of the cocoa business from Singapore-based Petra Foods on June 30, 2013. The new business has been integrated into Barry Callebaut’s segment ‘Global Sourcing & Cocoa’.
• In early 2013, Barry Callebaut strengthened its presence in Scandinavia by acquiring Swedish ASM Foods AB. Part of this acquisition was a factory in Mjölby producing specialty compound chocolate, fillings and inclusions.
• The completion of the sale of the Dijon factory in November 2012 marked the final step in the disposal of all consumer activities. 

• Barry Callebaut signed its first long-term outsourcing agreement in South America with Arcor-Dos en Uno of Chile as well as the first agreement in Scandinavia with Danish Carletti A/S.
• As well as opening the significantly extended factory in Toluca (Mexico), Barry Callebaut continued its expansion into other fast-growing emerging markets: To meet growing cocoa demand in Asia, a new cocoa factory in Makassar (Indonesia) has been opened together with joint venture partner P.T. Comextra Majora; Barry Callebaut established a local chocolate production site in Eskişehir (Turkey) to further tap into this fast-growing chocolate market; in Japan Barry Callebaut has relocated its operations into a bigger factory close to Tokyo; to gain a foothold in the Andean Region, a new chocolate factory is under construction in Santiago de Chile (Chile) opening in 2014.
• Barry Callebaut received the approval of the EU Commission for its health claim on cocoa flavanols – the first in the cocoa and chocolate industry – opening up new market potential for the company’s ACTICOA^® products.
• As a part of its sustainable cocoa initiative “Cocoa Horizons”, Barry Callebaut opened its first Cocoa Center of Excellence in Côte d’Ivoire, where the company will train 300 trainers in the coming 12 months. The company has more than 50 staff on the ground who work with cocoa farmers and who ensured the training of 40,000 cocoa farmers in 575 farmer field schools last year. Overall, customer demand for sustainable cocoa and chocolate products increased by 56% in fiscal year 2012/13.

Regional / Segment performance

Region Europe⁷ – Substantial volume growth translates into strong EBIT performance

The European chocolate confectionery market rose 2.1%. In Western Europe growth was 1.7%, while markets in Eastern Europe increased by 2.8%.⁸
In Region Europe, Barry Callebaut stepped up its growth pace in the last months of the fiscal year despite a challenging market environment. Overall, sales volume increased significantly by 8.1% to 744,078 tonnes.

Region Western Europe achieved a record year. The strong growth in relatively mature markets was driven by strategic partnerships, specialty products as well as the newly acquired businesses la Morella nuts and ASM Foods. The two global Gourmet brands Callebaut^® and Cacao Barry^® gained market share in almost all markets, even in Southern Europe. The Beverages division rebounded.

The still young Region EEMEA has established itself with new headquarters and a soon-to-be- opened Chocolate AcademyTM center in Istanbul, as well as the recently inaugurated chocolate factory in Eskişehir, also in Turkey. The region continued its double-digit growth and achieved strong results both in the Food Manufacturers and in the Gourmet business. Particularly strong markets were Russia, the Middle East and Turkey.

Overall sales revenue in Region Europe grew by 9.4% to CHF 2,352.5 million. Operating profit (EBIT) increased by 9.0% to CHF 253.2 million as a result of good volume growth and margin improvements, partly offset by extraordinary supply chain costs due to capacity constraints. 

Region Americas – Remarkable performance continues

The US chocolate confectionery market decreased by 0.9%, Brazil went up 1.2%⁸.
In this overall flat-volume market environment, Region Americas once more achieved excellent volume growth of 16.7%. All markets and Product Groups contributed to this positive development. Volume increases in North America and Mexico were fueled by strategic partnership agreements and the Gourmet business, and also benefited from the successful integration of the Mona Lisa decorations business. Brazil achieved double-digit top-line growth, particularly in the Gourmet & Specialties Products business.
Sales revenue in the Region increased by 6.4% to CHF 1,182.7 million reflecting lower average raw material prices for the major part of the year.
The positive volume development and margin increases across all businesses resulted in a significant EBIT increase of 19.3% to CHF 107.6 million.

Region Asia-Pacific – Investment in future growth

Chocolate markets in the Region remained resilient in the face of an economic slowdown and accelerated their growth pace to 12.9%⁹.
Barry Callebaut grew its sales volume in Asia-Pacific by 1.8% to 58,832 tonnes. In the second half of the year, the relocation of the Japan factory, together with fully utilized capacities at other sites, did not allow Barry Callebaut to exploit the growth potential of the market. Gourmet continued to perform well. Barry Callebaut further strengthened its leadership in imported chocolate from Europe, driven by the Callebaut^® brand, and accelerated marketing and distribution efforts, particularly in China and India.

Sales revenue in the Region decreased by 4.5% to CHF 222.0 million as a result of lower average raw material prices compared to prior year. Operating profit (EBIT) was negatively impacted by a higher cost base as a result of ongoing expansion; EBIT decreased by 9.4% to CHF 26.9 million.

Global Sourcing & Cocoa¹⁰ – Significant expansion, assuming leadership

Global Sourcing & Cocoa significantly expanded its sales volume by 14.5% to 310,372 tonnes, mostly driven by the recent acquisition of the cocoa business from Petra Foods. Stand-alone sales volume went up by only 0.9% to 273,342 tonnes as a result of higher internal demand and selective sales to third-party customers due to low market prices.

Market prices for cocoa powder were significantly lower compared to last year. This is reflected in the sales revenue, which declined by 15.6% to CHF 1,126.9 million.
Operating profit (EBIT) decreased by 36.0% to CHF 41.7 million, partly due to the expected operational loss of the recently acquired cocoa business. Stand-alone EBIT decreased by 17.6% to CHF 53.7 million as a result of the expected negative effect of the combined cocoa ratio.

Raw material price developments

Cocoa prices moved downwards continuously until March 2013 as a result of a good main crop in West Africa and funds liquidating their long positions. Thereafter, driven by fears of a cocoa supply deficit for the 2013/14 season, prices rose again to close at GBP 1,634 per tonne on August 31, 2013.
The world sugar crop 2012/13 was very good with a surplus for the 3rd year in a row, driving prices down to the lowest level since 2010. In Europe, special measures were taken (import quotas and reclassification) increasing availability and thus stabilizing prices, but at still rather high levels.
Prices for milk powder rose sharply as of March 2013 due to a drought in New Zealand, the world’s leading dairy supplier, causing a record deficit in the market. In Europe, after stabilizing at an already high level in the first half of the fiscal year, prices followed the world market trend and significantly increased again.

Proposals to the Annual General Meeting (AGM)

Payout to shareholders
The Board of Directors will propose a payout to shareholders of CHF 14.50 per share at the Annual General Meeting of Shareholders on December 11, 2013. This represents an increased payout ratio of 35% of the net profit from continuing operations. The payout will be effected through a dividend payment from reserves from capital contributions. The distribution of these funds to shareholders will not be subject to withholding tax and – for individuals who are taxed in Switzerland and hold the shares privately – income tax. The dividend payment to shareholders will be effected on March 3, 2014, subject to approval by the Annual General Meeting of Shareholders.

Board of Directors
After electing two new members to the Board of Directors at the company’s Extraordinary Shareholders Meeting of April 22, 2013, all current members of the Board of Directors will stand for re-election for another term of office of one year except Markus Fiechter. As announced in April 2013, he will step down from the Board at the ordinary Annual General Meeting of Shareholders in December 2013 after having served since 2004. The Board of Directors, as well as the Executive Committee and all Barry Callebaut employees, express their sincere gratitude to Markus Fiechter for his many years of service and his most valuable contribution to the successful development of the company.

¹ Stand-alone numbers exclude the recently acquired cocoa business from Singapore-based Petra Foods. On June 30, 2013, Barry Callebaut closed the transaction it had announced on December 12, 2012. The business has been consolidated for the months of July and August in the full-year results of the Group.
² Including the recently acquired cocoa business.
³ As of consolidation of the recently acquired cocoa business: 6-8% average volume growth per year, and EBIT per tonne restored to pre-acquisition level by 2015/16 (CHF 256 per tonne) – barring any major unforeseen events.
⁴ The global chocolate confectionery market grew by 1.6% in volume. Source: Nielsen, September 2012 – August 2013.
⁵ Barry Callebaut passes on raw material prices to customers for the majority of its business.
⁶ As of consolidation of the recently acquired cocoa business: 6-8% average volume growth per year, and EBIT per tonne restored to pre-acquisition level by 2015/16 (CHF 256 per tonne) – barring any major unforeseen events.
⁷ Consisting of Western Europe and EEMEA (Eastern Europe, Middle East and Africa).
⁸ Source: Nielsen, September 2012 – August 2013 (Volume growth; chocolate confectionery market).
⁹ Source: Nielsen, September 2012 – August 2013. Total for China (+13.2%) and India (+12.7%). (Volume growth; chocolate confectionery market)
¹⁰ The figures reported under “Global Sourcing & Cocoa” include all sales of cocoa products to third-party customers in all Regions while the figures shown under the respective Region show all chocolate sales.

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Barry Callebaut:
With annual sales of about CHF 4.9 billion (EUR 4.0 billion / USD 5.2 billion) in fiscal year 2012/13, Zurich-based Barry Callebaut is the world’s leading manufacturer of high-quality chocolate and cocoa products – from sourcing and processing cocoa beans to producing the finest chocolates, including chocolate fillings, decorations and compounds. The company runs more than 50 production facilities worldwide and employs a diverse and dedicated global workforce of over 8,500 people.
Barry Callebaut serves the entire food industry, from industrial food manufacturers to artisanal and professional users of chocolate, such as chocolatiers, pastry chefs, bakers, hotels, restaurants or caterers. The two global brands catering to the specific needs of these Gourmet customers are Callebaut^® and Cacao Barry^®.
Barry Callebaut is committed to a sustainable cocoa production through its “Cocoa Horizons” initiative, and to help ensure future supplies of cocoa as well as improve farmer livelihoods.

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Group key figures for fiscal year 2012/13 – from continuing operations