Swiss chocolate maker Barry Callebaut has reported annual profit growth, despite the ongoing challenge of soaring cocoa prices. The company successfully passed on the increased costs to customers but cautioned that it expects a second consecutive year of stagnant sales volumes as the price of cocoa, a key ingredient, remains elevated.
In its latest financial statement, Barry Callebaut noted “significant uncertainty” regarding the impact of cocoa-related price hikes on short-term demand. The company emphasized its intention to maintain market share amid challenging conditions.
Rising Cocoa Prices
Cocoa prices have reached record highs, peaking at approximately $12,540 per metric tonne in April. The price has nearly doubled over the past year, placing significant strain on the chocolate maker’s finances. Barry Callebaut’s cash flow for the fiscal year ending in August was a negative CHF 2.3 billion (around €2.5 billion), prompting the company to borrow CHF 2 billion (€2.13 billion), which has tripled its net debt.
Jean-Philippe Bertschy, an analyst at Vontobel, expressed concerns about the sharp increase in net debt, noting that it is unlikely to be resolved quickly.
Revenue Growth Despite Challenges
Despite the financial pressure, Barry Callebaut managed to pass higher cocoa costs onto customers. As a result, the company reported a 22.6% increase in annual revenue, which reached CHF 10.4 billion. Recurring operating profit, excluding one-time items, rose 6.8% to CHF 704.4 million (€748.8 million). However, when factoring in one-off expenses and restructuring costs, net profit dropped by 33%, totaling CHF 446.1 million (€474.2 million).
Cost-Cutting Measures
The company is beginning to see the benefits of a two-year cost-cutting plan launched last year, which aims to save CHF 250 million (€265.8 million) annually. As part of this initiative, Barry Callebaut has already closed plants in Germany and Malaysia and plans to shut down one in Italy.
Bertschy acknowledged the company’s resilience in navigating the difficult market conditions, noting that while high cocoa prices continue to pressure profits, Barry Callebaut remains focused on long-term improvements.
Sales Volumes Hold Steady
Barry Callebaut’s chocolate sales volumes remained stable, totaling 2.279 million tonnes by the end of its fiscal year in August, slightly below the company’s forecast of 2.283 million tonnes. In the fourth quarter, volumes dipped by 1.2%, driven by weaker sales in the premium gourmet segment and a temporary production shutdown at the company’s plant in Mexico in August.
Looking ahead, the company faces a challenging market environment, with continued pressure from high cocoa prices and fluctuating demand, particularly in its high-end product lines.
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