Lindt & Sprungli’s first-half organic sales, announced today (21 August), failed to meet analyst expectations, as a poor economic outlook in its major markets dampened premium chocolate sales. However, the chocolate maker’s profit growth and affirmation of its full-year outlook were welcomed.
Jon Cox – Kepler Capital Markets
“Lindt said market conditions in H1 were anything but straight forward with sentiment weak with chocolate market flat in Europe although it continued to gain share… Organic growth was a shade lower than the 6% we anticipated but profitability came in more or less in line with consensus expectations. Given the ongoing favourable currency situation we nudge our estimates by 1% on average…. We are confident the company can use commodity headwinds to drive growth with A&P and report 50 basis point margin in 2012 (and 7% organic growth).”
Alexis Colombo, Chris Hallam, Lucinda O’Connor, Lucy Baldwin – Goldman Sachs
“Lindt reported 1H results today with a miss at organic growth (5.3% vs. company-compiled consensus of 6.1%) but they maintained guidance of 6%-8% organic revenue growth and 20-40bp operating margin expansion for the full-year. Note that Lindt’s profitability is seasonally skewed so that 1H typically makes up less than 15% FY EBIT making growth the focus of this release. We have made minor changes to our estimates for these results and FX. We do not view these changes as material, and there is no change to our investment thesis, rating or price target.”
Alain-Sebastian Oberhuber – MainFirst
“Organic growth rate of 5.3% was disappointing with volumes of +4.4% and price/mix of +0.9%, currency had a negative impact of -2.7%. This is in contrast to market expectations which are +6%. Lindt & Sprüngli had headwinds from the European markets. Europe had organic growth rate of +4%, North America +6.7% and RoW +8.7%. We think that the European organic growth was all right, mainly driven by high margin markets of Germany, France and Switzerland. The high margin business of Rest of the World also showed good growth rates.
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“In contrast to the once growth market of North America which was disappointing and the main reason for the miss of the lower organic growth rate. The high base of last year also did not help… EBIT-margin was stronger than expected based on lower cocoa prices, which compensated for the higher input costs in milk, nuts and sugar. Furthermore the question remains how much Lindt & Sprüngli spent on A&P in H1. A number the company did not disclose in the past and could raise some questions in the future. However, the EBIT-margin is not vital in H1 as the first six months are responsible for just 40% of group revenues.”