Emerging markets drive record Barry Callebaut half year net profits

By Shane Starling

- Last updated on GMT

Related tags: Barry callebaut, Trans fat, Hydrogenation, Saturated fat

The profits keep pouring in for Barry Callebaut
The profits keep pouring in for Barry Callebaut
Strong performance in emerging markets and a strategic focus on customer segmentation rather than individual products have driven Barry Callebaut to record half year profits.

The Swiss chocolate maker saw its six month net profit figure rise 9% to CHF158.8m (€122.81m) in the first half of 2010 even as political unrest grew in primary cocoa source the Ivory Coast. Western European sales volumes fell 1.8% amid profits coming under aggressive price pressure and "weaker consumer product results".

Eastern Europe sales volumes, however, rose 7.4% pulling itself out of a previous slump. Overall European volumes increased 2.3%.

Its global sourcing and cocoa business showed strong growth as operating profit jumped 76.9% from €105.88m to €128.04m.

Aside from the good performance in emerging markets and customer-led focus, reduced financial costs and favourable tax rates were cited as the primary reasons for the overall profit rise which was actually 17% in local currencies.

EBIT operating profit climbed 4% to CHF217.1m (€ 168.4m) on revenue of CHF2.74bn (€2.12bn), while chocolate volumes grew 7.1% to 706.6m tonnes. The period enabled Barry Callebaut to reduce its net debt 12.5% to CHF956.2m (€739.5m).

Emerging markets like India, China, Brazil, Poland, Russia, Mexico and the Asia Pacific were highlighted where investments were seeing 20+% volume gains in some markets. Emerging markets now account for 21% of Barry Callebaut's business.

“Once again, we managed to significantly outperform the global chocolate market by growing twice as fast,"​ said Juergen Steinemann.

Ivory Coast

Consolidation of an outsourcing deal with Kraft and the buy-out of the remaining 40% of its Malaysian operation were seen as as key events in the period by chief executive officer, Juergen B. Steinemann. He also highlighted growing unrest in the Ivory Coast which had driven the price of cocoa up 23% on 2010 prices. Milk powder prices also jumped 50%.

"In recent months, we faced a challenging political situation in Côte d’Ivoire, the world’s most important cocoa-growing country,” ​he said.

“In order to avoid supply problems we have put in place a contingency plan and stepped up our sourcing and production activities in other countries. We believe we have taken those steps necessary to enable us to honor our customer contracts and meet our commitments during 2011. However, our primary concern during this difficult time is the safety and welfare of our employees and everyone living in Côte d’Ivoire. We remain committed to the cocoa farming communities and hope for a peaceful resolution of the current situation.”

Customer segmentation

In a broadcast on the results, Steinemann paid tribute to the segmentation strategy that saw the company split into three core customer segments: Industrial food manufacturers, professional or artisanal users and global retailers.

"We have very much put chocolate into our different customer locations,"​ he said noting stronger relationships with Hershey and Nestlé also offered great outsourcing potential.

A deal with US coffee maker Green Mountain Coffee Roasters was providing a pipeline into the US beverage industry.

Healthier product commitments had also been met with reduced use of hydrogenated fats and trans fatty acids almost entirely eliminated.

The company aims to grow its chocolate volume sales by between 6-8% until 2013.

Related topics: Emerging Markets, Manufacturers

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