Lindt & Sprüngli posts upturn in half-year financial results
The Lindt & Sprüngli Group has gained sales of CHF 1.76 billion for the first half of 2019, representing a year-on-year increase of 6.2%.
Net income for the confectionery business was CHF 88 million, representing a 2.4 rise over last year’s comparable performance.
The company said its results came against a backdrop of mainly ‘saturated or stagnating chocolate markets’ and also expanded its market shares in all the key strategic territories.
There was also strong seasonal business reported, which included innovations within its product ranges, as well as encouraging results for its global retail network
In the “Europe” segment, Lindt & Sprüngli generated sales of CHF 874 million in the first half of the year, equivalent to 5.0% organic growth. The UK, Austria, Germany and Switzerland, as well as the Scandinavian countries, all recorded strong results, while the Eastern European markets – Poland, Russia, the Czech Republic, Slovakia and Hungary – did particularly well, posting growth rates in the high double-digits.
At the beginning of the year Lindt & Sprüngli also benefited from the late Easter business, which boosted chocolate consumption. Successful launches within the bestselling Lindor and Excellence ranges were the main growth drivers. Sales in Germany benefited from the limited Easter editions of the iconic Gold Bunny and the Mini Pralinés product line.
In Switzerland, Lindt & Sprüngli celebrated the opening of the Lindt Cocoa Center in Olten in June 2019 after only 12 months of construction work on its modernisation and expansion. The investment of CHF 30 million in this plant is a clear commitment to Switzerland as a business location and, thanks to increased capacity in cocoa mass production, a major milestone for the further growth of the entire Lindt & Sprüngli Group.
One of the main elements of this project is the installation of a state-of-the-art research facility which enables the company to conduct tests with cocoa varieties, chocolate recipes and processes. In Germany, Lindt & Sprüngli successfully completed the expansion of the logistics building at the Aachen site so that it is now connected to the local production facilities via a fully automated conveyor system.
Good performance in North America
The “North America” region achieved dynamic organic growth of +7.2% in the first half-year, to which all 3 US companies contributed. Sales rose to CHF 623 million. The situation in the US, the world’s largest chocolate market, improved and the trading environment recovered slightly after several difficult years of restructuring.
Lindt USA reported a sound result and market share gains following challenging previous periods. Also Ghirardelli recorded a positive result. Russell Stover achieved a sales plus in the first half-year thanks to the promising relaunch of the Bow Line praline range, as well as the success of the sugar-free product line with stevia extract. Hence, Russell Stover is on track to meet its growth targets.
In the US, Lindt & Sprüngli reportedly remains No. 1 in the premium chocolate segment and No. 3 in the overall chocolate market thanks to steady sales growth and rising volumes. The expansion of the state-of-the-art facility for cocoa and chocolate mass at the US location in Stratham, approved in 2018, is well under way. The investment project totaling around CHF 200 million will support the planned volume growth over the long term. Additionally, Lindt & Sprüngli is investing in the expansion of a standardized logistics network for the entire US market.
The significance of the “Rest of the World” segment for the Lindt & Sprüngli Group is growing year by year. These markets again displayed strong growth, with organic sales up by +8.3% to CHF 261 million. The growth and sales strategies are tailored to local consumer preferences and paid off especially in Japan, Brazil and China. These markets benefit from the groundwork of previous years and the increasing market presence of premium chocolate products.
The Global Retail business also posted solid results in the first half of 2019. Numerous new stores in prime locations in Japan, Brazil and Europe delighted consumers with their unique brand experience. Service training for Chocolate Advisors continued to play a key role in providing consumers with the high standard of service they are used to in the stores. Lindt & Sprüngli continues to expand the own Global Retail network in the second half of the year.
As the company noted, prices for the main raw materials, cocoa beans, have increased slightly compared to the previous year due to stronger demand. The business said that it compensates for any price fluctuations in the market by entering into forward transactions – a common industry practice. The prices for the other main ingredients, such as milk, hazelnuts and sugar, have also seen a slight increase year on year. However, cocoa butter prices improved slightly for Lindt & Sprüngli.
An effective sourcing strategy for raw materials and additional efficiency improvements helped to reduce material and personnel costs as a percentage of sales.
The Group’s average headcount increased to 13,556 employees in the first half of the year. Operating profit (EBIT) rose to CHF 126.2 million as of June 30, 2019, which corresponds to a 7.8% increase.