Lindt & Sprüngli records key half-year upturn with major share buy-back scheme
pic: Lindt
Premium Swiss chocolate business Lindt & Sprüngli has reported a resilient performance for the first half of 2022, delivering a 12.3% sales increase to CHF 1.99 billion, in addition to a 33.4% boost to its operating profit, totalling CHF185.2 million, writes Neill Barston.
Furthermore, the company, which has enjoyed a strong pipeline of innovation including unveiling its first oatmilk series at Sweets & Snacks Expo recently in Chicago, confirmed a a new buy-back scheme of registered shares and certificates of CHF1 billion.
Significantly, the business also delivered improved net income of CHF138.4 million for the period (up 36%), despite the business operating in what it described as a ‘challenging economic environment’ of supply chain bottlenecks for raw ingredients and packaging. It also noted that increasing pressures of inflation, energy prices and the ongoing war in Ukraine were concerning factors.
However, the business added that its success was based on the strong commitment of more than 14,000 employees, its focus on premium quality and consumer needs, the launch of innovative products and further expansion of geographic distribution. As a result of its improved position, the company raised its full year outlook to a level of 8-10% sales growth.
Furthermore, the business said that the positive growth trend of the global chocolate markets progressed unchanged in the first half of 2022. The main drivers were volume growth and price increases in roughly equal measure. The above-average increase of the premium segment continued unabated, with the business continuing to enhance its market share across regions.
According to the company, its seasonal business in the first half of the year, such as Valentine’s Day, especially Easter, followed by Mother’s Day, is very important for Lindt & Sprüngli and developed very well.
These gift-giving occasions could once again be celebrated without restrictions among family and friends in most countries. As a result of these developments, the product mix shifted in the last six months in favour of the higher-priced pralines gifting products, benefitting its Lindor products.
In contrast, sales of products for personal consumption, such as Excellence bars, grew less strongly. As a result of the sharp cost increases in the first half of the year, particularly for packaging materials, logistics, energy, and some raw materials, Lindt & Sprüngli had to raise sales prices to our trading partners in most countries – despite our substantial efforts to improve efficiency.
High organic sales growth
In the segment “Europe”, Lindt & Sprüngli achieved organic sales growth of +9.1% to CHF 980.1 million. Our core markets Germany and Italy reached double-digit sales growth thanks to the good Easter business. The Swiss market also recorded good sales growth, particularly on gift-giving occasions. In the Italian market, the integration of Caffarel in Lindt & Sprüngli Italy as well as the acquired retail operations of S.T. S.p.A. retail stores were successfully completed, thus laying the foundation for accelerated growth in the future. The smaller subsidiaries in Austria, Central Eastern Europe, Poland, and Benelux continue their successful track record and all show double-digit growth.
Within North America, there was a double-digit organic sales increase of +15.2% to CHF 739.1 million. The Lindt companies in the USA and Canada as well as Ghirardelli are standing out, as they grew at an above-average rate. Russell Stover, on the other hand, was able to keep sales around previous year’s levels.
The segment “Rest of the World” increased sales organically by +16.9% to CHF 272.5 million. Noteworthy are the companies in Japan, China, Brazil, and the duty-free business, all of which posted good double-digit sales growth. The duty-free business benefited from the renewed rise in worldwide passenger traffic at airports and was able to increase sales accordingly with an attractive range of products.
Costs and investments
In terms of operating costs, Lindt & Sprüngli was impacted by rising global inflation primarily in the areas of production and logistics. In the case of raw materials, this mainly affected milk powder and sugar prices. In the packaging materials sector, the generally high demand led not only to increased prices but also to delivery delays and longer delivery times.
To secure future growth targets, the Lindt & Sprüngli Group is continuing to invest in the expansion of its group-wide infrastructure. It highlighted its key project in the form of expanding the world’s largest cocoa liquor plant in Olten – is proceeding according to plan and will be available for the sustainable supply of all European production sites from 2024 on. At the same time, the capacity expansion of our Lindt production site in Stratham in the USA for the North American market is also continuing with high priority.
Sustainability
As a premium chocolate manufacturer, we are committed to our company purpose “We enchant the world with chocolate”. This is inseparably linked to our quality standards as well as sustainable and socially responsible business practices. Already in 2020, Lindt & Sprüngli has reached its important milestone of sourcing 100% of its cocoa beans fully traceable and externally verified under its own Farming Program.
According to the business, by the end of last year, its farming programme involved more than 91,000 cocoa farmers (2020: 80,000) in seven countries of origin, seeking to improve the lives of key cocoa farming communities with which it engages with. It has also committed to reducing the greenhouse gas emissions of its business activities in accordance with the Science Based Targets (SBT) Initiative. Based on this footprint, a plan of measures and a roadmap for the reduction of greenhouse gas emissions will be announced in Spring 2023.