LONDON, UK – At its Capital Markets Day in London, Barry Callebaut Group yesterday reveale a strategy update and long-term growth plan, with further details on its BC Next Level strategic investment program. In addition, the company presented its full year results for the fiscal year 2022/23.
The Barry Callebaut Group saw a slight sales volume decline of -1.1% to 2,280,925 tonnes in fiscal year 2022/23 (ended August 31, 2023).
Volumes were negatively affected by the prior year’s salmonella incident in Wieze which continued to impact results in Q1 2022/23, as well as by the weaker customer demand and increasing raw material prices.
The chocolate business reported a decline of -2.0%, with the global chocolate confectionery market declining -1.0%.
While EMEA volume declined in the first half of the year, recovery of +3.2% growth in the second half resulted in flat performance of -0.4% in the year. Asia Pacific and Americas both continued to see softer customer demand amid challenging markets, declining -2.0% and -4.6% in the year respectively.
In terms of the key growth drivers: Outsourcing (strategic partnership) volumes grew +1.7% (+4.8% in Q4). Gourmet & Specialties declined -4.8% due to lower demand and temporary stock unavailability earlier in the year due to the Wieze incident, but gradually recovered and ended the final quarter positive at +0.2%. Emerging Markets were broadly flat at -0.2%. Sales volume in Global Cocoa increased to 467,877 tonnes, a year-on-year increase of +2.4%.
Sales revenue amounted to CHF 8,470.5 million, up +9.7% in local currencies (+4.7% in CHF). The increase was driven by high raw material price increases and the overall inflationary environment.
Gross profit exceeded volume performance and amounted to CHF 1,348.5 million, up +16.0% in local currencies (+10.8% in CHF), as the inflationary environment was well managed through the company’s cost-plus pricing model.
Operating profit (EBIT) amounted to CHF 659.4 million, up +12.2% in local currencies (+5.6% in CHF) compared to prior-year EBIT recurring, well ahead of volume.
Performance improved in comparison to the softer prior year, which was heavily impacted by the Wieze incident in the final fiscal quarter, leading to lower volumes and related Operating profit (EBIT) recurring. In addition, the strong result in the Global Cocoa business contributed to the year-on-year increase.
EBIT per tonne improved to CHF 289, up 13.4% in local currencies (+6.7% in CHF), compared to EBIT recurring per tonne in the prior year of CHF 271. EBIT reported amounted to CHF 659.4 million vs. CHF 553.5 million in the prior year.
Net profit amounted to CHF 443.1 million, up +9.6% in local currencies (+3.4% in CHF) compared to prior-year net profit recurring7. The net finance costs slightly increased to CHF -124.1 million, up from CHF -121.8 million in prior year, as a result of higher interest benchmark rates. The income tax expense amounted to CHF -92.1 million in 2022/23, corresponding to an effective tax rate of 17.2% (16.4% in prior year).
Net working capital increased to CHF 1,466.2 million, compared to CHF 1,293.1 million in prior year. The increase was driven by the net effect of higher raw material prices on receivables, inventories and derivatives.
The adjusted Free cash flow decreased to CHF 251.8 million, compared to CHF 358.5 million in the prior year. Before the adjustment for cocoa bean inventories regarded by the Group as readily marketable inventories (RMI), cash flow generation declined to CHF 113.0 million, compared to a strong prior year (CHF 266.2 million). Free cash flow was heavily impacted by increases in raw material prices, particularly cocoa, which strongly affected net working capital.
Net debt increased to CHF 1,308.7 million from CHF 1,199.0 million in the prior-year period as working capital requirements expanded following raw material price increases. Taking into consideration the cocoa bean inventories regarded as readily marketable inventories (RMI), adjusted net debt decreased to CHF 41.1 million compared to CHF 349.8 million in the prior-year period.
Payout to shareholders
The Board of Directors is proposing to shareholders at the Annual General Meeting of Shareholders (AGM) on December 6, 2023, an increased payout of CHF 29.00 per share. This corresponds to a payout ratio of 36% of the reported net profit within the targeted ratio of 35-40%. The dividend will be paid to shareholders on, or around, January 10, 2024, subject to approval by the Annual General Meeting of Shareholders.
Four strategic growth priorities to drive Barry Callebaut ‘s ambitions
BC Next Level will fully unlock the Group’s leading position in the chocolate ingredients market in pursuit of four strategic long-term growth priorities:
Deepen outsourcing partnerships: Barry Callebaut is uniquely positioned as the global partner of choice to the most important customers in the Fast Moving Consumer Goods (FMCG) sector who want more sustainable and innovative chocolate solutions. Barry Callebaut will deepen these partnerships, leveraging its innovation capabilities to create better chocolate solutions for customers. In the coming years, Barry Callebaut aims to win two thirds of outsourcing partnership volumes expected to come to the market.
Launch Gourmet 2.0: Barry Callebaut will move closer to markets and customers to better serve foodservice and artisanal customers and chains by broadening the focus across premium and mainstream market segments, simplifying its brand portfolio and modernizing its routes to market. Barry Callebaut’s ambition is to increase its value market share in the Gourmet market globally and deliver growth at double the underlying market growth rate.
Scale up Specialties: Barry Callebaut’s ambition is to double the size of its core Specialties business by increasing the penetration of its highly differentiated specialty offerings in high growth areas such as gluten-free, vegan, single origin and other specialty chocolates. To achieve this, Barry Callebaut will continue to evolve its product offering to focus on the most scalable market segments and launch a dedicated customer-focused innovation capability. The company will also enhance its route to market by leveraging its deepened outsourcing partnerships. The growth of Specialties will support the continued premiumization of Barry Callebaut’s Food Manufacturing and Gourmet businesses.
Move to “fair” market share in the region Asia-Pacific (APAC): Barry Callebaut’s ambition is to double the size of its APAC business to deliver value market share in line with the wider Group. Barry Callebaut will put into place localized strategies built around the new country clusters to offer solutions tailored to local markets, with optimized distribution leveraging the digital enhancements delivered by BC Next Level. Both strong demographic trends and investments from leading FMCG players support Barry Callebaut’s ambition in APAC.
These growth priorities will be underpinned by Barry Callebaut’s new streamlined, and tech-enabled organizational capabilities following the BC Next Level measures. Barry Callebaut’s commitment to best-in-class sustainability will further drive the implementation of the growth priorities. The company aims to inspire modern cocoa farming practices and therewith create the future of sustainability for the industry. The company sees execution against its own industry-leading sustainability ambitions as a key commercial differentiator and as a key source of alignment between itself, its customers and the end consumer.
