Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Barry Callebaut AG (BYCBF, Financial) confirmed its growth strategy and achieved solid results despite significant disruptions in the cocoa supply chain.
- The company made progress on its Next Level transformation program, with key achievements in cost savings and operational improvements.
- Barry Callebaut AG (BYCBF) reported strong EBIT growth, demonstrating the resilience of its cost-plus business model in a volatile market.
- The company successfully expanded its presence in the fast-moving consumer goods sector, securing key outsourcing deals and new customer agreements.
- Barry Callebaut AG (BYCBF) launched its first direct-to-customer webshop in Germany, enhancing its market reach and customer engagement.
Negative Points
- The company faced significant challenges due to a disrupted cocoa supply environment and high cocoa bean prices, impacting its financial performance.
- Barry Callebaut AG (BYCBF) experienced flat overall volume growth, with some regions, such as North America, reporting a decline in sales volume.
- The company's free cash flow was heavily impacted by the sharp increase in cocoa bean prices, leading to a substantial rise in net debt.
- There were temporary operational disruptions, such as the shutdown of the Toluca site in Mexico, affecting production and sales.
- Barry Callebaut AG (BYCBF) anticipates continued short-term market pressure due to ongoing pricing negotiations between its customers and retailers.
Q & A Highlights
Q: Can you elaborate on the impact of cocoa bean price fluctuations on your financial performance?
A: Peter Vanneste, CFO, explained that the cocoa bean price increase has significantly impacted their financials, particularly in terms of free cash flow and inventory value. The price increase led to a CHF2.8 billion impact on working capital, primarily affecting inventory. Despite this, their cost-plus model has protected profitability, and they have secured liquidity through bond issuances to manage these challenges.
Q: How is Barry Callebaut addressing the challenges in the cocoa supply chain?
A: CEO Peter Feld discussed their efforts to enhance productivity in smallholder farming and their collaboration with governments in Ghana and Cote d'Ivoire to change legislation that currently restricts replanting of cocoa trees. They are also investing in high-tech farming initiatives to improve supply chain resilience.
Q: What are the key strategic priorities for Barry Callebaut moving forward?
A: Peter Feld highlighted four growth priorities: winning outsourcing deals in fast-moving consumer goods, doubling the gourmet business, scaling up the specialties business, and increasing market share in Asia. They are also focusing on transforming from an ingredient supplier to a recognized provider of chocolate solutions.
Q: Can you provide more details on the BC Next Level transformation program?
A: Peter Feld explained that the BC Next Level program aims to deliver CHF250 million in synergies and improve capabilities in finance, service, sustainability, and quality. They have closed social plans in several locations and are investing in digital transformation and quality improvements to enhance customer experience.
Q: What is the outlook for Barry Callebaut in the coming year?
A: Peter Feld stated that they expect flat to slightly positive growth in chocolate sales, with a double-digit increase in recurring EBIT. The focus will be on executing the Next Level transformation and navigating market challenges, with a long-term goal of achieving low to mid-single-digit volume growth and mid to high-single-digit EBIT growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
