Lindt & Sprüngli reported an increase in earnings today (7 March) that outpaced sales growth as the group expanded its margins over 2016.
In the year to end-December, Lindt & Sprüngli said that operating profit increased to CHF562.5m, an increase of 8.4% year-on-year. The group expanded its operating margin to 14.4% compared to 14.2% in 2015. Net earnings rose 10.2% to CHF419.8m, with a return on sales of 10.8% compared to 10.4% last year.
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Lindt said it was able to book these margin increases despite pressure from “high raw material prices” and “increasing price pressure from trading partners”.
The Swiss chocolate maker added it was able to grow revenue ahead of its markets, with full year sales rising to CHF3.9bn, an increase of 6.8%.
In Europe, sales rose 7.4% and Lindt said it saw an acceleration in the UK and Germany where sales were up by double-digits. In North America, Lindt sales were up 3.4% in the context of a declining overall market. Meanwhile, Lindt said its geographic expansion into emerging markets is paying off, with a “very dynamic” performance from the rest of the world where total sales increased by 10.2%.
MainFirst analyst Alain Oberhuber suggested that Lindt’s organic growth levels in “high margin” markets like Germany and the UK, as well as the completion of its portfolio repositioning in the US following the Russell Stover acquisition, helped boost the margin in 2016, with continued positive effects expected in 2017.
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By GlobalData“We expect that market estimates could increase gradually due to continued strong organic growth rate in high margin European countries, lower input costs (cocoa is 30-35% of commodities) and lower tax rate. We expect that the worst is over. Lindt’s adjustment with its US portfolio is done and distribution is optimised. Furthermore we assume that Lindt & Sprüngli’s above average growth rate in high margin markets like Germany and France continues as well as its market gains in the high growth UK premium chocolate market,” he said.
Looking to 2017, Lindt said it “expects sales growth to be broadly in line with the previous year, and a further improvement in the operating margin”. The company also confirmed its mid- to long-term goal of organic sales growth of 6-8% combined with an increase in the operating profit margin of 20-40 basis points.
