KILCHBERG, Switzerland – After a challenging previous financial year, Lindt & Sprüngli is reporting again positive results. In the first half of 2021, the chocolate manufacturer responded with speed, innovative strength, and flexibility to the unchanged demanding environment during the Covid-19 pandemic. Thanks to the great commitment of the employees, continuously high advertising investments in 2020 and 2021, new product launches, and continued customer focus, Lindt & Sprüngli was able to report a positive organic sales increase of +17.4% to CHF 1.8 billion (previous year: CHF 1.5 billion) in the first six months of the financial year 2021. Due to the renewed appreciation of the Swiss franc against the major currencies, growth in Swiss franc amounts to +17.2%.
Since the beginning of the year, the global chocolate markets have recorded growth compared to the weak previous year. Furthermore, Lindt & Sprüngli benefited from an above-average development of the premium segment in which the company holds a global leading position in. However, the worldwide measures to fight against the pandemic continued to adversely affect business performance in various markets and business segments in the first half of the year. At Lindt & Sprüngli, this primarily impacted the business segments of the own shop network Global Retail as well as Duty Free. Global Retail recovered with double-digit growth compared to a very weak previous year. However, due to the ongoing temporary local lockdowns and thus lower consumer frequency, sales were lower compared to 2019. The Duty Free business was still unable to match the results of the pre-pandemic years due to the ongoing restrictions in global air travel.
Lindt & Sprüngli was able to meet the increased global demand for high-quality chocolate products with the key franchises Lindor and Excellence. Both product lines were again main sales drivers in the first half of the year and recorded solid growth. It is also particularly pleasing that the important Easter business, recovered significantly and even exceeded expectations. In addition, the online business doubled its sales. The reasons for this are the unbroken trend in consumer shopping behavior from brick-to-mortar to online retail and the strategic focus on further developing the omni-channel approach. This comprises and coordinates sales activities via own e-shops, the online channels of the retail partners, and the own shop network. Lindt & Sprüngli is thus well positioned and was able to further expand its market share in the online business in the first half of 2021. Despite the still difficult market environment, the company gained market shares in all strategically important markets and recorded double-digit sales growth in all three regions: “Europe”, “North America”, and “Rest of World”.
Lindt & Sprüngli: Double-digit sales growth in all three regions
In the “Europe” segment, Lindt & Sprüngli achieved organic sales increase of +16.4% to CHF 941.3 million (previous year: CHF 785.6 million). Despite the persisting numerous constraints and their effect on the economy, the sales contributions of the important chocolate markets Germany, France, UK, and Italy are particularly noteworthy. For home consumption, the popular leader products Lindor and Excellence contributed again to positive retail sales. Another highlight is the very pleasing Easter business, which also developed positively compared with the pre-crisis year 2019. Furthermore, Lindt & Sprüngli Italy was able to acquire and integrate the long-standing partner for Lindt retail shops at the beginning of the year. The acquired prime locations are strategically situated and will strengthen the retail business as well as the brand presence in Italy. In the Swiss home market, the strong presence of the Lindt brand was expanded in the spring through a new retail partnership with Migros, one of the country’s largest retailers. Since the end of April, Lindt products have been available in all stores throughout Switzerland, complementing the existing chocolate range in the premium segment.
The “North America” region achieved a very good organic sales development of +18.8% to CHF 620.9 million (previous year: CHF 551.5 million). Once again, market shares were gained in the USA, the world’s largest chocolate market, in the first half of the year. All three brands, Lindt, Ghirardelli, and Russell Stover, thus strengthened Lindt & Sprüngli’s leading position in the premium chocolate segment and as no. 3 in the overall market. In particular, Lindt in the US, made a significant double-digit contribution to sales growth in the region, benefiting from high demand for the permanent product range in the retail trade and from good sales in the important seasonal business. Ghirardelli performed again positively across all sales channels and the food service business also recovered. In addition, the growth trend in the booming baking segment continued. The Russell Stover subsidiary benefited from good demand for its sugar-free product line and stabilization in the important seasonal Valentine’s Day and Easter business.
The “Rest of the World” segment increased sales organically by +18.0% to CHF 237.0 million (previous year: CHF 197.8 million), with the Japanese, Russian, and Chinese markets performing particularly well. The strong growth of the online business of the previous year continued in the first half of 2021, especially in China. In Brazil, Lindt & Sprüngli was able to take over the shares of the joint venture partner in the local retail business at the beginning of the year and will continue to expand the shop network according to an unchanged plan. The Duty Free segment is still significantly below the sales level of 2019.
The regulatory measures to protect the population since the beginning of 2020 have had a major impact on global supply chains and the economy in particular. During this period, Lindt & Sprüngli has succeeded in securing supplies to production sites as well as to trade partners at all times. Thanks to a forward-looking purchasing strategy, costs for cocoa products were kept stable despite continued high price volatility in the first half of the year. In contrast, prices for the raw materials sugar and milk powder as well as for packaging materials recorded demand-related price increases.
To ensure sales growth, Lindt & Sprüngli continued to maintain a high level of investments in all production sites also in the first half of 2021. Worth mentioning is the decision to further expand the cocoa liquor plant in Olten, Switzerland, to ensure the long-term supply of cocoa liquor to the European plants. Further major investments were made for capacity expansion at the production sites in Germany and at the US site in Stratham for pralines production lines.
Financial result
Lindt & Sprüngli achieved a significantly improved operating profit (EBIT) of CHF 138.8 million in the first six months of 2021 (previous year: CHF 17.1 million), corresponding to an EBIT margin of 7.7%. Net profit reached CHF 101.6 million (previous year: CHF 19.7 million), resulting in a return on sales of 5.6%. The free cash flow amounted to CHF 227.9 million (previous year: CHF 188.7 million) resulting in a cash flow margin of 12.7%. Total assets as of June 30, 2021, amount to CHF 8.08 billion (December 31, 2020: CHF 8.05 billion) and the equity ratio increased slightly to 58.0% (December 31, 2020: 57.2%).
Buyback program
Given the high liquidity, the solid balance sheet, and the continuously high cash flow, Lindt & Sprüngli has launched a buyback program for registered shares and participation certificates in the amount of up to CHF 750 million. The buyback started on June 1, 2021, and will last until December 30, 2022, at the latest. The buyback program is progressing as planned and as of June 30, 2021, shares and participation certificates in the amount of CHF 57.1 million have already been repurchased. This corresponds to 0.26% of the registered shares and participation certificates outstanding at the beginning of the buyback program.
Sustainability: new goals in the areas of packaging and environment
Sustainable and socially responsible business principles are at the heart of the business activities of Lindt & Sprüngli. In the field of sustainability, Lindt & Sprüngli is proud to present the new, important goals in the areas of packaging and environment. The chocolate manufacturer is committed to minimizing its environmental footprint along the entire value chain. This starts with the packaging as well as its procurement. With the “Sustainable Packaging Initiative”, the goal has been set, to make all packaging 100% recyclable by 2025 and to no longer use non-recyclable plastics. Furthermore, 100% of pulp and paper-based packaging will be sourced from a certified sustainable supply chain. In addition, Lindt & Sprüngli will continuously and proactively challenge its entire packaging portfolio and further reduce material use.
Having achieved the targets set five years ago for the reduction of greenhouse gases in production, the company is making new commitments. Lindt & Sprüngli is setting itself new, clearly measurable, and ambitious climate targets based on the “science-based targets” approach. In addition to the short-term reduction targets for a zero-emission production, Lindt & Sprüngli is defining “net-zero emission” of its comprehensive activities in the medium-term. Detailed information on the sustainability strategy and new commitments can be found in the Sustainability Report 2020 at: https://www.lindt-spruengli.com/sustainability/reports
Lindt & Sprüngli: Outlook
Assuming that the growth of the global chocolate markets slows down in the second half of the year, Lindt & Sprüngli expect organic sales growth in the lower double-digit range for the full year 2021. Furthermore, the company confirms the unchanged medium/long-term target of organic sales growth of 5–7% p.a. for the following years. For 2021, Lindt & Sprüngli expects an increased operating margin at the upper end of 13–14% and aims to return to a level of 15% from 2022 onwards. For the following years, the company confirms its medium/long-term target of a continuous improvement in the operating margin of 20–40 basis points p.a. These estimates assume that the global pandemic situation will continuously improve.
