Natra troubled by prospect of cocoa processing duopoly

Spanish cocoa processor Natra has posted a net loss in its 9-month results which it attributed to rising cocoa prices amid speculation of industry consolidation.

Cargill is rumoured to be interested in ‘for-sale’ ingredients player ADM Cocoa after being overtaken as the number one cocoa processor when Barry Callebaut finalized a deal for Petra Foods’ ingredients division this year. The big changes to the dynamics of the industry are taking its toll on Natra.

Global grinding duopoly?

Glòria Folch, inestor relations for Natra told ConfectioneryNews, without mentioning the companies by name:“Only after these two corporate deals, the two leading players in the industry would control most of the world production of cocoa derivatives.

Notably, they would control almost all the production of cocoa derivatives in Ivory Coast and Ghana, which are important countries as they account together for approximately 60% of the global production of cocoa beans. As in all industries, reduced competition always puts a lot of pressure on the sector.”

“That said, what is also true is that consolidation processes, have also had a positive effect in the past for Natra as we gain visibility as an alternative supplier.”

Cocoa prices surge

Cocoa prices on the London futures market (LIFFE) grew 15% between July and September, after only a 1% increase in the first half of the year.

Prices were up further in the first week of October to £1,737 per metric ton.

In parallel, cocoa butter prices also soared – up 70% over last year to €6 per kg, according to the US National Confectioners Association (NCA).

“All this has been transferred to the food industry with significant pressures on production costs of chocolate products, and in the case of Natra, on gross margins of its consumer products division,” Natra said in its financial release.

“The third quarter of 2013 was a difficult one for the cocoa and chocolate business, mainly due to the consequences of the concentration processes carried out by major industry groups and continuing uncertainties about the evolution of the harvests in major producing countries. These events led to some speculation around cocoa products, with a lot of pressure on the price of this raw material.”

Natra does not usually pass price increases onto to customers immediately, but it said that price hikes could come in revision contracts during the last quarter.

Natra’s 9-month performance

Natra recorded 9-month sales of €263.24m ($362.64m) up 1.5%, but EBITDA was down 10.5% to €16.52m ($22.76m) and it posted a net loss of €1.61m ($2.22m).

It could have been worse for Natra, but its nutraceutical business Natraceutical, which accounts for 10% of the company’s sales, performed strongly.

Natra’s chocolate and cocoa business, which makes up 90% of the company’s sales, has two divisions. The Industrial Goods division accounts for 25% of turnover and supplies cocoa butter, powder and coatings to manufacturers, while the larger Consumer Goods division manufactures finished products, such as countlines, mainly for private label.

Both divisions were negatively impacted by rising cocoa prices.