On the money: Barry Callebaut "confident" following investment surge
CEO Juergen Steinemann said the bottom line decline was the consequence`of "significant but deliberately chosen" investments
Swiss chocolate maker Barry Callebaut insisted it is "confident" on the outlook for the coming fiscal year after investments weighed on the group's bottom line.
Barry Callebaut booked a drop in net profit this morning, with earnings for the 12-months to the end of August declining to CHF142.6m (US$151.7m), down from CHF178.6m last year.
However, management was quick to emphasise the drop in profits was the consequence of refinancing costs - which see the business enter into more secure agreements on longer terms - as well as investments made over the past 12 months.
Speaking to analysts during a conference call today (7 November), CEO Juergen Steinemann said the bottom line decline was the consequence of "significant but deliberately chosen" investments that will position Barry Callebaut for longer-term gains.
Over the past year, Steinemann said the company has invested in infrastructure improvement, factory expansions, ramp up costs, building its gourmet business and developing a sustainable cocoa supply.
The company said it expects its top line - which was up 8.7% - would continue to benefit from rapid growth in emerging markets, particularly as it develops relationships with "local stars" as well as focusing on expansion in China and Eastern Europe.
Steinemann also predicted revenues would be driven by the increasing trend for chocolate makers to outsource production of their consumer products. This year the company secured two significant outsourcing deals to supply chocolate to Unilever for ice cream production and to supply Grupo Bimbo in Mexico. He added "the sky is the limit", as there is a huge potential to grow sales through outsourcing deals.
However, CFO Victor Balli added that, as the proportion of sales from these two revenue streams increases, there could be pressure on margins.
"When growth comes from emerging market investments and outsourcing... it can have a dilutive effect," Balli commented. "This is why we also focus on cost savings and developing out higher margin gourmet business."
According to Steinemann, Barry Callebaut also plans to drive growth through innovation investment. Of particular note, he emphasised the group is the first global player to win approval from the European Food Safety Authority for a health claim related to its chocolate products. ESFA has approved Barry Callebaut's claim that consumption improves circulation.
Steinemann said: "Bottom line, our result was deliberately influenced by investments we made. We made investments for the future."
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