Barry Callebaut on a hot (cocoa) streak

Barry Callebaut on a hot (cocoa) streak

Global chocolate dominance continues.

Barry Callebaut, the world's leading manufacturer of high-quality cocoa and chocolate products, achieved strong top-line growth with an increase in sales volume of 8.2 percent to 1,112,309 tonnes in the first nine months of fiscal year 2012/13 (ended May 31, 2013). During Q3, the company even accelerated its volume growth to 8.9 percent. With this, Barry Callebaut significantly outpaced the global chocolate market, which increased by 1.9 percent.
For the nine-month period, growth was recorded across all Regions, strongly supported by the company's long-term outsourcing agreements and strategic partnerships as well as the Gourmet & Specialties Products business. Business in emerging markets continued to perform well, in particular EEMEA and Latin America.

Based on Barry Callebaut's cost-plus model, lower average raw material prices compared to the previous year translated into lower sales revenue: -1.3 percent in local currencies (-0.5 percent in CHF) to CHF 3,540.7 million.

Outlook - Integration process successfully initiated, mid-term guidance confirmed
Barry Callebaut's continuous growth is the result of the consistent execution of its long-term strategy. After the closing of the recent acquisition of the cocoa business from Petra Foods, Barry Callebaut will focus on both a successful integration of the acquired business and on the Group's margin improvement. CEO Juergen Steinemann on the outlook: "Based on our leadership position and the visibility on the business front, we are confident of achieving our mid-term guidance."

Strategic development: Successful closing of acquisition of Petra Foods' Cocoa Ingredients Division
On June 30, 2013, Barry Callebaut successfully closed the acquisition of the Cocoa Ingredients Division from Singapore-based Petra Foods Ltd. The signing of the transaction was announced on December 12, 2012. Subsequently, a joint integration team developed the integration masterplan that is now being implemented. The combination of the two complementary businesses makes Barry Callebaut the world's largest cocoa and chocolate products manufacturer with over 8,000 employees, an estimated annual sales volume of 1.6 million tonnes and CHF 6 billion (EUR 4.9 billion / USD 6.4 billion) in sales revenue and expands the company's global footprint to 50 factories on four continents.

In June, Barry Callebaut funded the purchase price which will be approximately USD 860 million (subject to final adjustments following the closing) with the placement of 10 year senior notes of USD 400 million with a coupon of 5.5 percent and the issuance of new shares (c. USD 300 million). The remainder will be financed through the partial utilization of an existing bridge loan.

Regional/segment performance

Region Europe - Continued solid growth in a challenging market environment
Sales volume in Region Europe continued its solid growth path with an increase of +5.7 percent to 554,284 tonnes. Again, Western Europe performed very well against the background of a still challenging market environment. The Gourmet & Specialties Products business showed strong growth in Q3. In Eastern Europe, Middle East and Africa (EEMEA) sales volume went up double-digit in both the Food Manufacturers Products and the Gourmet business. Russia performed particularly well.

Sales revenue in the Region increased by 4.4 percent in local currencies (+5.0 percent in CHF) to CHF 1,748.0 million.

Region Americas - Continued strong volume growth momentum
Region Americas continued to grow double-digit; sales volume went up 17.1 percent to 308,492 tonnes. In North America, business was driven by both the company's corporate accounts in the industrial business and Gourmet thanks to a continued improvement in the food service business in the US. Business in South America went up double-digit positively influenced by good Gourmet sales.

Sales revenue in the Region increased by 4.2 percent in local currencies (+ 6.7 percent in CHF) to CHF 863.4 million influenced by lower average raw material prices compared to last year.

Region Asia-Pacific - Strong Gourmet performance
In Asia-Pacific, Barry Callebaut's overall sales volume was up 5.4 percent to 44,791 tonnes. For the Food Manufacturers Products business both strategic as well as local customers contributed to the good growth. Driven by good sales with the global brand Callebaut®, the Gourmet & Specialties Products business increased double-digit.

Overall, sales revenue decreased by 2.8 percent in local currencies (-2.5 percent in CHF) to CHF 168.7 million as a result of lower raw material prices.

Global Sourcing & Cocoa - Revenue impacted by lower cocoa powder prices
The segment Global Sourcing & Cocoa increased its total sales volume by 3.5 percent to 204,742 tonnes. Higher internal demand for cocoa powder limited sales to third parties.

Market and selling prices for cocoa powder were significantly lower compared to last year. This had an impact on sales revenue, which declined by 16.4 percent in local currencies (-16.5 percent in CHF) to CHF 760.6 million.

Raw material price developments
In the past three months, cocoa prices continued to trade in the range of GBP 1,400 and 1,600 per tonne. Good 2012/13 mid-crop arrivals and 2013/14 forward sales combined with funds building long positions led to relatively stable prizes.

World sugar market prices continued to decline thanks to the surplus that is still on the market. In the EU, special measures (import quotas and reclassification) stabilized prices, but at still rather high levels.

Due to a drought situation in New Zealand, the world's leading dairy supplier, market prices for milk powder rose sharply before stabilizing at historically high levels.

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