Chocolate and cocoa manufacturer The Barry Callebaut Group is buoyant, despite the impact of a strong Swiss franc and a weak cocoa products market, leading to a slump in net profits.
In its half-year results for the period ending 29 February 2016, the group reported “solid volume growth and strong free cash flow”, with sales volumes up +4.5% to 933,327 tonnes. Over the same period, global chocolate confectionery volumes fell 2.6%, according to Nielsen.
It saw a broad-based sales volume growth in chocolate, outperforming the market, and said that this was aided by “intentionally phasing out” less profitable contracts in cocoa.
Gross profit increased by 4.7% in local currencies, largely in line with volume growth, as the negative impact from the combined cocoa ratio was compensated for by a good development on margins and “a better product mix in the group’s chocolate business”, due to the strategic focus on this area.
Net profit was down -12.5% in local currencies, “affected by higher financial expenses, income taxes, and foreign exchange effects”.
Barry Callebaut recently entered a long-term outsourcing agreement with Romanian confectioner Romega, and signed a deal with another firm that has been kept confidential. It sees further potential in outsourcing, since the top five chocolate players currently outsource only 10%-20% of chocolate needs, and 70% of volumes in emerging markets are still produced in-house. The firm is also exploring 3D printing.
Antoine de Saint-Affrique, chief executive of the Barry Callebaut Group, said: “We have achieved solid results despite very challenging market conditions. Our volume growth shows a consistent, strong performance.
“Our bottom-line reflects the predicted negative impact of the weak cocoa products market and a significant negative currency translation effect. Our focus on ‘smart growth’ is gaining traction. This is all very much in line with our expectations.”
Of the company’s future outlook, de Saint-Affrique said: “We will continue to focus on putting ‘smart growth’ into action and on transforming our cocoa business in order to restore its EBIT per tonne. We are pleased to see that our actions are beginning to bear fruit. We confirm our mid-term guidance.”