KILCHBERG, Switzerland – Despite major global challenges due to the Covid-19 pandemic, Lindt & Sprüngli achieved a solid result in the financial year 2020, once again outperforming the overall chocolate market and gaining market shares in nearly all countries. The organic sales development of the Lindt & Sprüngli Group declined by -6.1%, but positive sales growth was generated in important markets.
Despite the negative impact of the second wave of the pandemic, the decline in sales and profit margin (EBIT) is within the target range announced in the half-year 2020. Significant progress was made in the area of sustainability, on the one hand for the important raw material cocoa beans, and on the other hand in the areas of greenhouse gas and water.
Chocoladefabriken Lindt & Sprüngli AG had a very dynamic start into the 2020 financial year. The Group achieved a solid increase both in sales and profit until March. However, the stringent measures subsequently introduced worldwide to contain the Covid-19 pandemic had a negative impact on key areas of the business and therefore, on the Group’s full-year result:
The global network of own shops suffered from temporary closures and lower frequency. Christmas and especially Easter as important seasonal gifting occasions were affected across all sales channels. The restrictions had a particularly negative impact on sales in North America’s food-service business and Italy’s traditional trade.
Tight restrictions on air travel triggered a sharp decline in sales in the Travel Retail segment. Fortunately, sales growth in the premium segment, where Lindt & Sprüngli is market leader, was above average, particularly in the second half of the year.
The company benefited from this trend and was able to meet increased demand for products destined for self-consumption at home with its diverse portfolio of high-quality products. This helped to drive retail trade sales of the leader products Excellence and Lindor.
The Excellence range even posted double-digit growth. Lindt & Sprüngli responded quickly and innovatively to the changes in consumer behavior caused by the pandemic with numerous entrepreneurial initiatives such as home deliveries, click & collect services, and the expansion of e-commerce.
Online sales doubled to around 5% of Group sales. The plan is to proceed with this positive development in 2021 with the launch of new e-shops in different countries. From own shops through to e-shopping and corporate gifting, teleshopping, and subscription programs – all these channels are part of an overarching omni-channel strategy designed to ensure a seamless consumer experience across all platforms.
Solid result in Europe
Despite the difficult market environment created by repeated local lockdowns, the region of EUROPE achieved a pleasing result, with only a modest decline of -2.9% in organic sales. Sales in the markets of Germany, the United Kingdom and Spain actually increased, with Eastern Europe and Scandinavia (Nordic) even reporting double-digit growth. At the same time, Lindt & Sprüngli managed to gain important market shares and present the premium brands very successfully in retail trade. However, the home market of Switzerland suffered especially from the sharp decrease in frequency at top tourist destinations and the temporary closures of the own shops. The subsidiaries in Italy and Austria also had to cope with the decline in tourism. In addition, traditional trade in Italy, an important retail channel for the business, was almost completely closed.
Important market share gains in North America
The North America region was severely affected by the pandemic and reported a decline of -6.8% in organic growth. Nevertheless, significant market share gains were achieved in the chocolate bar segment for Lindt and Ghirardelli, as well as in Russell Stover’s sugar-free product line. The losses were partly offset by rising self-consumption of chocolate bars and the great success of the baking products segment at the subsidiary Ghirardelli. The measures to contain the virus particularly affected the network of own shops due to repeated closures, and also hit the food-service business due to restaurant closures. The subsidiary Russell Stover, whose main activity is in the gifting segment, suffered particularly from the restrictions imposed during the pandemic at Easter and Christmas. However, an increase in efficiency in the supply chain helped to improve the profitability of the North America region and to invest in brand advertising to maintain the position as No. 1 in the premium segment and No. 3 in the overall US chocolate market.
Sales increase in the growth markets of China and Japan
The Rest of the World segment recorded a decrease of -16.1%, in particular due to the sharp decline in the Travel Retail business and the frequent temporary shop closures resulting from the lockdowns. Positive news included strong sales increase and market share gains in the important growth markets of China and Japan. Although the Duty Free business started the financial year 2020 with double-digit sales growth, the all-year travel restrictions triggered a steep decline in sales.
Lindt & Sprüngli: Business performance
For the financial year 2020, the Lindt & Sprüngli Group reported sales of CHF 4.02 billion, equivalent to a decline of -6.1% in organic growth. Over the past financial year, the Swiss franc again strengthened substantially compared to all major currencies. The resulting negative currency effect on the consolidated result led to a decrease in sales of -10.9% in domestic currency. Lindt & Sprüngli reported Group operating profit (EBIT) of CHF 420.3 million (-29.1% compared to previous year). This represents an EBIT margin of 10.5% (previous year: 13.2%). Net income amounted to CHF 320.1 million (-37.5% compared to previous year), providing a return on sales of 8.0%. Operating cash flow reached CHF 787.6 million (previous year: CHF 830.9 million). The balance sheet is still very solid with a high equity ratio of 57.2%.
Important interim goal reached: 100% traceable and externally verified cocoa beans
For many years now, Lindt & Sprüngli has taken responsibility in the cocoa bean supply chain. The premium chocolate maker has achieved a major interim goal in 2020: all cocoa beans in the chocolates of Lindt & Sprüngli are now 100% traceable and externally verified by a third party. This is a major step toward the sustainable manufacturing of chocolate products and at the same time Lindt & Sprüngli is laying the foundation for future success. In 2020, the company also reached some important milestones in the areas of water consumption and reduction of CO2 emissions. On the one hand, a 10% reduction in greenhouse gas emissions per ton of production compared to 2015 was achieved in the production process. On the other hand, Lindt & Sprüngli managed a 10% decrease in municipal water consumption per ton of production in the manufacturing process compared to 2015. New targets in these areas are currently being elaborated and will be announced in spring 2021.
Lindt & Sprüngli: Outlook
Lindt & Sprüngli is convinced that it will master the current economic downturn and emerge even stronger from this global crisis. A solid foundation – built on a strong business model, stable finances and high liquidity, improved efficiency in many areas, and great employee commitment – puts Lindt & Sprüngli in an excellent position for the future. By continuing to invest heavily in advertising and product innovation, and consistently focusing on consumers, the basis for gaining further market shares is laid. What is more, the company is convinced that the positive growth of the chocolate market – especially the premium segment – will continue in the future.
For the year 2021, Lindt & Sprüngli expects to reach organic sales growth of 6-8% and confirms thereafter its unchanged medium to long term organic sales growth target of 5-7% p.a. In 2021, Lindt & Sprüngli expects the operating profit margin to increase to a level of 13-14% and aims to return subsequently to a level of 15% in 2022. For the years thereafter, the company confirms its medium to long term target of a continuous increase of the operating profit margin of 20-40 basis points p.a. In these estimates, Lindt & Sprüngli assumes a continuous improvement of the pandemic situation.
Buyback program for registered shares and participation certificates
Due to the high liquidity, the solid balance sheet and the continuously high cash flow, the Board of Directors of Chocoladefabriken Lindt & Sprüngli AG decided to start a buyback program for Lindt & Sprüngli registered shares and participation certificates in the amount of CHF 750 million. The buyback is expected – after consent of the competent authorities – to start on June 1, 2021 and should last until December 31, 2022 at the latest. For the buyback, a separate trading line will be opened for the registered shares and the participation certificates on the SIX Swiss Exchange AG.
Lindt & Sprüngli: General Annual Meeting
Lindt & Sprüngli appreciates the great trust of its shareholders, particularly in these extraordinary times. The cash flow development allows to continue the attractive payout policy. At the 123rd Annual General Meeting scheduled for May 4, 2021, the Board of Directors is therefore proposing a payout of CHF 1,100.– per registered share and CHF 110.– per participation certificate.
Link to Annual Report 2020: https://report.lindt-spruengli.com/20/ar/en/
