Cocoa and chocolate giant Barry Callebaut saw sales volumes increase, revenue jump to US$6.8 billion and net profit spike by almost 40 percent – all factors which have led to the company extending its mid-term guidance by one year. The Swiss group has benefited from its gourmet business with chefs and pastry makers as well as the trend of large food corporations outsourcing their chocolate production. 

And, at the same time, cocoa bean prices have fallen 21 percent compared to last year. 

Despite the global trend for healthier snacks, Barry Callebaut has announced robust results for a fiscal year that has also seen the company achieve several milestones, including the prestigious unveiling of Ruby, the fourth type of chocolate. 

“I am delighted to announce a strong set of results. We saw a good performance across all our Regions and Product Groups at top and bottom-line level. We keep delivering on our ‘smart growth’ agenda, which is reflected in the improvement of all our Group key financial metrics,” says Antoine de Saint-Affrique, CEO of the Barry Callebaut Group.

In fiscal year 2016/17 (ended August 31, 2017), the Barry Callebaut Group – the world’s leading manufacturer of high-quality chocolate and cocoa products – increased its sales volume by 4.4 percent to 1,914,311 tons, which is well above the global confectionery market growth rate of +0.1 percent. 

The fourth quarter saw an acceleration to +9.2 percent. The good momentum was supported by all key growth drivers: Gourmet & Specialties (+9.7 percent), Outsourcing (+9.3 percent) and Emerging Markets (+5.9 percent), further helped by an improved market environment. 

The intentional phase-out of less profitable cocoa contracts, amounting to 50,000-60,000 tons overall, was completed; sales volume growth in Global Cocoa for the year was +0.4 percent. 

At the same time, the Chocolate business grew by +5.6 percent with a strong performance in all regions. Sales revenue was up +1.2 percent in local currencies (+1.9 percent in CHF) to CHF 6,805.2 million (US$6.8 million) as a result of a good product mix, offset by lower cocoa bean and cocoa product prices.

Gross profit increased by +14.6 percent in local currencies (+14.3 percent in CHF) and came in at CHF 986.7 million, mainly driven by volume growth, the product and customer mix, as well as the restored profitability of the Global Cocoa business.

Operating profit (EBIT) significantly increased by +22.3 percent in local currencies (+21.5 percent in CHF) and amounted to CHF 488.2 million (US$488.7 million). 

Recurring operating profit, excluding a one-off effect of CHF 18.1 million (US$18.1 million) from acquisitions, increased by +17.8 percent in local currencies (+17.0 percent in CHF) to CHF 470.1 million (US$470 million). 

Overall, the Group’s recurring EBIT per ton, excluding one-off effects from acquisitions, was at CHF 245.6, an increase of +12.9 percent in local currencies (+12.1 percent in CHF).

Net profit for the year increased by +39.6 percent in local currencies to CHF 302.9 million (US$303 million). Recurring net profit increased by +31.3 percent in local currencies (+30.1 percent in CHF). This is a reflection of the strong EBIT, a stable tax rate and lower financing costs.

Free cash flow was exceptionally strong and amounted to CHF 475.6 million (US$476.3 million), compared to CHF 430.9 million (US$431.5 million) in the previous fiscal year. This is the consequence of a stronger operating profit, lower working capital and continued discipline on capital expenditure (CAPEX). As a result, net debt is down by 23.5 percent.

Outlook
Looking ahead, CEO Antoine de Saint-Affrique adds: “We will continue to deliver on our ‘smart growth’ strategy. A more supportive cocoa products market and slightly improving global demand for chocolate, together with the consistent execution of our strategy, give us confidence to extend our mid-term guidance to fiscal year 2018/19: We are targeting 4-6 percent volume growth, and EBIT above volume growth in local currencies on average for the four-year period 2015/16 to 2018/19, barring any major unforeseen events.”

Strategic milestones achieved in fiscal year 2016/17
Barry Callebaut continued its geographic and footprint expansion. Deliveries from the new chocolate factory in Gresik, Indonesia, to outsourcing partner GarudaFood are on track. 

After closing the acquisition of the chocolate production facility in Halle from Mondelez International in December 2016, products are now being delivered under a long-term supply agreement. 

In July 2017, Barry Callebaut announced the acquisition of DOrsogna Dolciaria in Italy, thus expanding its value-adding Specialties & Decorations business and making Barry Callebaut a leading supplier of decoration and inclusion products in Western Europe. 

In September 2017, the company also announced the acquisition of Gertrude Hawk Ingredients in the US, adding specialized product know-how and product capabilities in the areas of shell molding, panning, enrobing, and solutions for shaped inclusions and peanut butter chips. 

Barry Callebaut opened a new Chocolate Academy Center in Milan, relocated and upgraded its training academies in Mexico City and Mumbai, and redesigned the ones in Shanghai and Singapore. In addition, the first BC Studio in Asia was launched in Bandung.

In terms of innovation, in January, Barry Callebaut launched Callebaut ChocoGelato, a revolutionary chocolate base used to create ‘gelateria’ style chocolate gelato, the only gelato on the market with real Belgian chocolate inside. 

In September, the company unveiled its fourth type of chocolate: Ruby. This chocolate is made from Ruby cocoa beans. Using a unique process, Barry Callebaut unlocked the flavor and color tone naturally present in these cocoa beans. No berries, berry flavors or coloring are added.

Sustainability: Forever Chocolate
Barry Callebaut’s sustainability strategy launched in November 2016, delivered positive results. Globally the company trained more than 157,000 farmers in good agricultural practices. 

Approximately 36 percent of all cocoa and 30 percent of other chocolate ingredients were sustainably sourced in fiscal year 2016/17. 

In the Ivory Coast, participating cocoa farmers experienced on average a productivity increase of +23 percent per hectare of farmland. As part of the Initiative for Sustainable Landscapes project (ISLA), Barry Callebaut is working with the Dutch Sustainable Trade Initiative (IDH), to increase the productivity of cocoa farmers around Taï National Park and the Cavally Fôret classée. 

Together with IDH and the International Finance Corporation (IFC), Barry Callebaut has set up a risk-sharing facility that supports a money lending program for farmers so they can invest in productivity packages.

The acquisition of the Halle factory in Belgium from Mondelez International, combined with the extension of the strategic partnership with this customer, and the acquisition of DOrsogna Dolciaria in Italy as well as further capacity expansions in Europe, are investments with the clear objective to cater for future growth and to serve European customers better.

Region Americas – Solid performance, strong margin improvement
In Region Americas, sales volume increased by +2.2 percent to 518,359 tons, wheras the chocolate confectionery market grew by +0.6 percent. 

Sales revenue rose +1.5 percent in local currencies (+2.8 percent in CHF) to CHF 1,668.7 million. Operating profit (EBIT) for the region was up +9.2 percent in local currencies (+9.0 percent in CHF), as a consequence of a positive product mix and further cost leverage in the region. 

Barry Callebaut also made significant investments in the US for additional manufacturing capacity and warehousing. In addition, Barry Callebaut announced the acquisition of Gertrude Hawk Ingredients in October 2017. All these investments place the company in an even better position to serve its customers and to capture future growth.

Region Asia Pacific – Double-digit top and bottom-line growth continues
Sales volume in Region Asia Pacific rose by +19.1 percent to 91,020 tons. In contrast, the chocolate market in the region grew by +3.1 percent. 

The group’s above-market development was fuelled by fast growth in countries such as China and Indonesia, both in Gourmet and in Food Manufacturers, as well as by the ramp-up of the long-term supply agreement with GarudaFood in Indonesia. 

Sales revenue rose by 12.7 percent in local currencies (+13.4 percent in CHF) to CHF 347.9 million (US$348.3 million). Operating profit (EBIT) grew by 20.2 percent in local currencies (+20.2 percent in CHF), driven by volume growth and a strong Gourmet business.

Global Cocoa – Cocoa Leadership project delivering on expectations
The successful implementation of the Cocoa Leadership project with a number of different initiatives has delivered in line with expectations. Sales volume to third-party customers was basically flat at +0.4 percent and amounted to 438,434 tons. 

Sales revenue declined by 7.7 percent in local currencies, due to lower cocoa products prices. Operating profit (EBIT) significantly increased by CHF 47.2 million (US$47.2 million) and amounted to a total EBIT of 64.9 million, driven by the good results from the Cocoa Leadership project and the more favorable market conditions in the cocoa products market.