Barry Callebaut, the world's leading manufacturer of cocoa and chocolate products, increased its sales revenue, operating profit (EBIT) and net profit. However, geopolitical uncertainties and a weak economic environment in key regions throughout the world impacted profit growth, which remained flat.
For the fiscal year of 2002/03, which ended 31 August 2003, consolidated sales revenue increased by 36 per cent to CHF 3.6 billion (€2.3m). The company reported that its sales revenue was negatively impacted by the strong Swiss franc, despite sales revenue growth of 42 per cent at constant exchange rates.
Contributing to the increase were the solid organic growth in the Food Manufacturers and the Gourmet & Specialties business units, higher average cocoa prices and the first-time consolidation of Stollwerck for the entire fiscal year and of Luijckx for six months, the company said.
Sales volumes rose by 17 per cent to 891,048 tonnes, with the sales increase in the Consumer Products business unit at a disproportionately high 288 per cent and the deliberate decrease of sales of semi-finished products to third-party customers in Cocoa dropping to 11 per cent.
Operating profit (EBIT) rose by 20 per cent to CHF 208.7 million, exceeding the company's target set at the beginning of the fiscal year of achieving an EBIT of at least CHF 200 million; EBIT growth at constant exchange rates was 25 per cent.
The company had set aside CHF 31.4 million of the total of CHF 80 million in restructuring provisions for the year in connection with the acquisition of Stollwerck, which it confirmed had all been used. BC said that restructuring of Stollwerck is progressing according to plan, both from a financial and an operational perspective, and will be completed in summer 2004.
Patrick G. De Maeseneire, chief executive officer, commented: "We successfully completed our transformation from an industrial cocoa and chocolate manufacturer to a fully vertically integrated provider of solutions to the food industry.
Today we offer cocoa and chocolate products in virtually every possible form and vertical range of manufacture, from the cocoa bean to the finished product on the store shelf. We have managed to add businesses that are close to the consumer while at the same time expanding our positions in the industrial and artisanal customer segments."
Business performance
The global economy remained weak throughout the 2002/03 fiscal year, the company said, having a negative effect on consumer sentiment. Chocolate sales therefore stagnated in most countries, even declining in some cases.
In Western Europe, the German consumer market was affected particularly severely and the extremely hot summer weather in Europe also took its toll. Developments in Eastern Europe were more positive. Momentum did not come from North America until the second half of the calendar year.
In Asia-Pacific, the tourism and gastronomy sectors suffered a massive setback as a result of the SARS epidemic. The difficult economic and political situation in various Middle Eastern countries and the implications of the war in Iraq also had a negative effect. Business with consumer products in Africa, on the other hand, was promisingly robust.
However, the company posted encouraging volume growth in the year and succeeded in strengthening its market shares in its business with industrial and artisanal customers. After expanding the consumer products business, it grouped its activities into two clearly defined business segments as of September 1, 2003: the Industrial Business Segment and the Food Service/Retail Business Segment. The segment reporting for fiscal 2002/03 reflects the new structure.
Development of business segments
The past fiscal year was characterised by volatile cocoa prices. Despite the company's business models being structured in such a way that fluctuations in the prices of raw materials are largely neutralised in the income statement, higher cocoa prices did impact the results.
Barry Callebaut generated mainly organic sales revenue growth of 9 per cent to CHF 2,193.9 million in this business segment (61 per cent of Group sales revenue). Sales volumes amounted to 631,146 tonnes, made up of 510,319 tonnes (+5 per cent or more than 24,000 tonnes) in the Food Manufacturers unit and 120,827 tonnes - or a deliberate reduction of 11 per cent in sales to third-party customers - in Cocoa.
Operating profit (EBIT) rose by 14 per cent to CHF 142.3 million. Total segment assets amounted to CHF 1,815.4 million, including current assets, which were influenced by the higher average price of cocoa during the past fiscal year. EBIT over total segment assets amounted to 7.8 per cent, up from 7.1 per cent in the previous year.
Food service/retail business segment
Sales revenue for the Food service and retail segment showed strong growth of 126 per cent to CHF 1,377.4 million in fiscal year 2002/03, or 39 per cent of Group sales revenue. This hefty increase is primarily attributable to the inclusion of Stollwerck and, to a much lesser extent, to the acquisition of Luijckx, but also to good organic volume growth in the Gourmet & Specialties business unit, the company said. Operating profit (EBIT) rose by 31 per cent to CHF 104.3 million.
Future growth
The company said it intends to further expand in the Industrial Business Segment in the coming year by taking advantage of the outsourcing trend underway in the food manufacturing industry, by "leveraging its innovation power and exploring new geographic opportunities".Meanwhile the company added that the Food Service/Retail Business segment will continue to selectively expand in the coming years, with the Gourmet & Speciality business continue to expand into ready-to-use and ready-to-sell products.
Patrick G. De Maeseneire, chief executive officer said: "The economic signals we got during the first two months of the current fiscal year do not give us sufficient evidence that the world economy is recovering in a sustainable way.
All in all, I am more positive on the US market and more cautious on Europe. Past results, our current order book and the innovations underway clearly prove, however, that Barry Callebaut is well positioned and capable of generating growth in both of its business segments even under difficult conditions."