Barry Callebaut CEO looks to re-set business foundations amid challenging results

The Barry Callebaut Group has released its first six-month financial results under recently appointed new CEO Hein Schumacher, inheriting a challenging position with sales down 7.3% to CHF 6.75 billion for the period, reports Neill Barston.

Notably, the picture was also equally challenging as regards volumes sold, which was down 6.9% year-on-year, to 1,010, 247 tonnes, in the wake of major price volatility this past quarter – which has since eased back considerably within the past month, as cocoa prices have seemingly maintained around the $3,000 a tonne margin.

However, despite headline figures being largely in negative territory, net profit for the period was in fact up, by 191% to CHF 89 million, after a depressed period last year, in which results stood at CHF 30 million profit for its global operations, following major market uncertainty.

As pricing uncertainty continued to pose potential tests moving into this year, the company announced earlier this quarter that it had struck up a partnership with Zurich University, exploring cocoa alternative ingredients. Consequently, the business also formed a partnership with the fast-rising Choviva brand, which tapped into that focus of chocolate-like experiences that are not dependent on conventional cocoa supply chains.

Speaking on his priorities for the coming months, Hein Schumacher, (who came in to replace the outgoing former CEO Peter Feld, who had reportedly contemplated a potential split-out of the business and selling off its cocoa business, which led to his departure), had  previously been a senior executive at Unilever, said it was a question of empowering its regional businesses around the world, and revive the business after a challenging period.

Hein said: “As I reflect on my first few months at Barry Callebaut, it is clear that we have an unparalleled market position, deep expertise and fundamental growth opportunities. At the same time, we have significant work to do to reinvigorate the company after a turbulent period of industry disruption and transformation. We need to restore fundamentals, step-up service levels and empower our regional businesses. In the first half of our fiscal year, cocoa bean prices decreased, which is encouraging for future chocolate market momentum and supported strong free cash flow generation. Yet the unique speed of the market decrease combined with a competitive overcapacity market, volume declines and supply disruption impacted EBIT performance and adjusted our profitability outlook for the year as we prioritize restoring volume and leading the market back to growth.

“Our immediate priority is to focus – commercially, operationally and organisationally. By focusing our people on impactful initiatives and reinvesting in a customer-centric winning culture, we will stabilize fundamentals, deliver on distinct growth opportunities and ultimately unlock strong financial performance.”

Turbulent performance
As the company’s results revealed, global Chocolate volumes decreased by -5.1%, ahead of the declining global chocolate confectionery market according to Nielsen3 (-6.5%).

It also reported that volume development in Food Manufacturers (-5.4%) was impacted by negative market dynamics as customers adapted behaviors in the context of lower demand, as well as by supply disruption in North America.

Furthermore, volumes in Gourmet decreased by -3.4% as competitiveness was temporarily pressured by a high price list in a declining cocoa price environment as well as by supply disruption.

Examining its regional performance within Global Chocolate, Asia Pacific, Middle East and Africa (AMEA, +8.5%) was reportedly its strongest contributor. Volume growth in AMEA reached double-digits in the second quarter driven by market share gains in China, momentum with key customers in India and additional business secured in Australia, partly offset by market pressure in Japan and South Korea.

In addition, the company reported that Latin America saw slightly positive volume growth (+1.5%) with solid growth in the second quarter, supported by strong performance in Gourmet. Central and Eastern Europe (-3.6%) was impacted by lower volumes for large Food Manufacturer customers due to challenging macroeconomic conditions, while local accounts saw solid growth especially in Türkiye.

As for Europe, the Western part of the continent was down 4.3% in its sales figures, which it said was down to  market demand softness, with many countries affected by economic uncertainty. 

There were also tests for its markets in the US, as volume decrease of 12.6% were registered, reflecting network supply disruption following the temporary closure of the St. Hyacinthe factory in Canada in the first quarter and challenging market dynamics.

However, the company concluded that the region saw sequential monthly improvement as the business rebuilds inventories and meets growing customer contracts and orders. The US has historically proved a strong market for the business, which is set to take its place among exhibitors at this year’s Sweets & Snacks Expo taking place in Las Vegas next month.