This is a strong set of results across the board for the company. In particular paying down debt with the additional free cash flow as future interest rates are going up, seems like someone in the finance dept is paying attention.
However, CEO, Peter Boons’ statement at the end of the results is a little odd. Boone says “I am profoundly heartened by the way our colleagues across the globe have come together to support those in need”. It’s not clear what colleagues in need he’s referring to; I suspect it is employees who may have had to deal with the difficulties of the pandemic.
But it also comes across as tone-deaf to all the producers and farmers who have not only had to deal with COVID, but are also suffering under a severely depressed cocoa price. The same low price that has helped boost Barry Callebaut is layering more misery on those least able to afford it.
Finally, we noted that the differential of profits in local currency vs that in CHF was minimal, possibly indicating better currency hedging by their treasury dept, or perhaps just a reflection of the strength of the Swiss Franc.
- Sales volume up +8.7%, with outstanding chocolate performance (+9.9%)
- Sales revenue of CHF 4.0 billion, up +16.5% in local currencies (+15.8% in CHF)
- Operating profit (EBIT) recurring1 of CHF 318.1 million, up +8.0% in local currencies (+7.2% in CHF), EBIT reported up +12.3% in local currencies (+11.5% in CHF)
- Net profit recurring1 of CHF 212.1 million, up +3.6% in local currencies (+3.1% in CHF), Net profit reported up +9.7% in local currencies (+9.3% in CHF)
- Continued good cash generation with adjusted Free cash flow2 of CHF 167.0 million
- Confident of delivering on mid-term guidance3
In the first six months of fiscal year 2021/22 we continued our strong growth trajectory, well ahead of the underlying chocolate confectionery market. A strong performance across the board, in particular in chocolate, delivered strong volume, solid profitability and continued good cash generation.
Peter Boone, CEO, Barry Callebaut
The strong growth was supported by all Regions and key growth drivers: Outsourcing (+7.3%), Emerging Markets (+8.7%) and Gourmet & Specialties (+29.5%). Sales volume in Global Cocoa grew by +4.0% to 227,951 tonnes
Financial Breakdown
Sales revenue
CHF 4,030.3 million, up +16.5% in local currencies (+15.8% in CHF). The increase was impacted by the overall inflationary environment, which Barry Callebaut manages through its cost-plus pricing model for the majority of its business.
Gross profit
CHF 606.4 million, up +7.2% in local currencies (+6.5% in CHF), growing overall in line with volume. The positive volume and mix effect was reduced through the negative impact of the cocoa business and the impairment of financial assets in Russia
Operating profit (EBIT)
recurring amounted to CHF 318.1 million, despite being affected by the aforementioned impairment of financial assets, leading to an increase of +8.0% in local currencies (+7.2% in CHF). The recurring EBIT per tonne was fairly stable at CHF 273, reflecting the strength of the cost-plus model. The recovery of indirect tax credits for prior fiscal periods related to a recent decision by the Brazilian Supreme Court applicable to all taxpayers had a positive impact of CHF +12.8 million. As a result, the reported EBIT amounted to CHF 330.9 million, up +12.3% in local currencies (+11.5% in CHF).
Net Profit (recurring)
CHF 212.1 million, up +3.6% in local currencies (+3.1% in CHF) compared to prior-year Net profit. Net profit reported amounted to CHF 224.8 million, up by +9.7% in local currencies (+9.3% in CHF). The increase was supported by higher Operating profit (EBIT), which was partially offset by higher Net financing cost due to higher benchmark interest rates and impairments on cash in emerging markets, in particular in Russia. Income tax expenses amounted to CHF –47.1 million, which corresponds to an effective tax rate of 17.3% (17.4% in prior year).
Net working capital
Slightly increased to CHF 1,598.8 million from CHF 1,579.1 million in the prior-year period. The increase was well below the Group’s volume growth, thanks to overall good working capital management. Receivables increased on the back of strong business momentum. Inventories were higher to ensure product availability amidst the global supply chain constraints. Both increases were largely offset by higher payables.
Free cash flow
Continued to strengthen in the six months under review and amounted to CHF –132.6 million compared to CHF –183.4 million in the prior-year period. Adjusted for the effect of cocoa beans considered as readily marketable inventories (RMI), the adjusted Free cash flow amounted to a strong CHF 167.0 million (February 28, 2021: CHF 162.9 million).
Net debt
further decreased to CHF 1,594.3 million from CHF 1,752.9 million in the prior-year period, driven by the Group’s strong Free cash flow generation. Taking into consideration the cocoa bean inventories as readily marketable inventories (RMI), the adjusted Net debt decreased to CHF 561.1 million compared to CHF 661.6 million in the prior-year period.
Outlook – Confident of delivering on mid-term guidance
Looking ahead, CEO Peter Boone said: “I am profoundly heartened by the way our colleagues across the globe have come together to support those in need. Our strong team, our global footprint and our cost-plus model make us confident that we can deliver on our mid-term guidance in a continued volatile market environment.”
