Barry Callebaut plans to focus more on integrating recent acquisitions and supply deals this year than buying businesses or striking more supply deals, the chocolate group’s CEO has told just-food.
The Swiss company supplies chocolate and cocoa products to brand owners like Nestle and Hershey through a series of “outsourcing” deals signed in recent years. In its half-year results, announced today (8 April), Barry Callebaut said “outsourcing and strategic partnerships” accounted for 30% of its total volumes in the six months to 28 February.
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The deals have fuelled Barry Callebaut’s recent growth and the company believes more of the world’s chocolate production will continue to be outsourced to specialist suppliers like itself. In the last year, the group has continued to sign deals; in October, for example, it secured an agreement to supply chocolate products to confectioner Arcor-Dos en Uno in South America.
Speaking after Barry Callebaut reported its first-half results this morning, CEO Juergen Steinemann said there was “potential” for the company to strike more deals with regional players.
However, Steinemann told just-food he wanted Barry Callebaut to spend the months ahead focusing first on absorbing the cocoa ingredients business it is set to buy from Petra Foods, among other initiatives.
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“For me, 2013 is very much integration and implementation time,” he said. “To integrate the big Petra Foods deal, to integrate the smaller acqusition in Scandinavia, to implement [efficiency programme] Project Spring, which is a complex issue but also to finish the outsourcing deals of which three are still in the process of being integrated. If I could have a wish, if I could structure the timing, it would be to focus on this first and put additional effort on other things as of next year.”
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By GlobalDataThe Barry Callebaut chief insisted there would be more deals “in the pipeline”. He said: “We are looking at all markets. We are looking at mature markets – western Europe and North America – where the logic for outsourcing is much more obvious for people. But we are also looking in emerging markets. Arcor is a good example. There is much more in the pipeline, although the timing is not in our hands.”
Steinemann, however, said he would be happy to make an acquisition to boost Barry Callebaut’s gourmet business, which supplies hotels and restaurants.
“The only thing which I always would give over-riding priority to would be a further acquisition in gourmet. We have been very successful in growing that business but this is where we really can do more and want to do more. But, then again, an acqusition takes two to tango,” he said.
Barry Callebaut this morning reported half-year earnings that missed analyst forecasts. Net profit for the six months to 28 February was down 7.7% at CHF116.4m (US$124.5m). Analysts had expected earnings to come in at CHF129m, according to a poll by Reuters.
Costs linked to Barry Callebaut’s planned acquisition of Petra’s cocoa ingredients division, wider investment in the business and lower turnover hit profits.
Revenue dropped 2.6% at CHF2.39bn amid lower prices for its cocoa ingredients. However, sales volumes increased 7.8%, which Barry Callebaut said was a faster rate of growth than the market.
Steinemann highlighted the increase in volumes and the higher product margins the company generated. “We had very strong volume growth of almost 8% in a market that grew 1.5%, so that’s not bad,” he said. “Our product margins improved. I’m very happy about in particular.”
Lower selling prices for cocoa products hit Barry Callebaut’s EBIT and net profit as prices of cocoa powder fell amid lower demand in western Europe and North America. The lower prices meant Barry Callebaut’s “combined cocoa ratio”, a measurement which also includes cocoa butter prices, fell. CFO Victor Balli said forecasting the ratio was “difficult” but he added: “We currently see more upside than downside potential.”
Barry Callebaut incurred costs from running plants in western Europe at almost full capacity.
However, Barry Callebaut reiterated its “mid-term” financial forecasts until 2014/15. It sees volumes increasing by an average of 6-8% and average EBIT growth in line with volumes.
The acquisition of Petra’s cocoa ingredients business, which is set to close later this year, will mean Bary Callebaut will miss its EBIT margin per tonne target for two financial years. However, it sees cost savings meaning its EBIT per tonne target would be reinstated by the 2015/16 financial year.
Barry Callebaut sees the Petra deal as an “excellent strategic fit” and has defended the transaction in recent weeks.
The acquisition will be financed through a capital increase and a bond issue. Last month, Standard & Poor’s cut its rating on Barry Callebaut.
