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July 14, 2015

Lindt sales propelled by Russell Stover, share gains

Lindt & Sprüngli reported a 17.4% jump in first-half sales, propelled by market share gains in Europe, the US and emerging markets as well as the contribution from the recently acquired Russell Stover business.

Lindt & Sprüngli reported a 17.4% jump in first-half sales, propelled by market share gains in Europe, the US and emerging markets as well as the contribution from the recently acquired Russell Stover business.

The company said total sales increased to CHF1.4bn (US$1.47bn) in the half. Organic sales were up 9.4% in the period. This growth was achieved despite "slowing" and "stagnating" chocolate markets, "record high" raw material prices and the strength of the Swiss franc.

"Record-high prices for raw materials and continuing strength of the Swiss franc are causing certain challenges also for Lindt & Sprüngli. However, particularly in the context of these challenges, the company’s long-standing and successful business model pays off well," the company insisted. This model includes a focus on quality and innovation as well as a "clear" positioning at the premium end of the market and ongoing investments in the brand and technologies, Lindt revealed.

Lindt maintained its 6-8% target for medium to long-term annual organic growth in this financial year. The company added that, once the integration of Russell Stover is complete, it anticipates a 20-40 basis point improvement in EBIT margins.

Vontobel analyst Jean-Philippe Bertschy described the sales growth as "phenomenal". He wrote in a note to investors: "We thought we were very aggressive with our 8% organic growth [forecast]. The 9.4% is literally phenomenal in a very depressed chocolate market in 1H, especially when assuming that 85%-90% of that was volume growth. Lindt is gaining significant market shares in all markets. Moreover, the company is likely to benefit from falling cocoa butter, sugar and dairy prices. We believe that Lindt will continue to invest in its brands and in Russell Stover's integration, therefore 20bp-40bp margin improvement at most."

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