Barry Callebaut AG · SIX:BARN
Barry Callebaut — H1 2009/10 Earnings Presentation
53 slides from Barry Callebaut's earnings presentation, June 2010
Slide 1: Barry Callebaut Roadshow presentation
Barry Callebaut Roadshow presentation June 2010 June 2010 Barry Callebaut - Roadshow presentation
Slide 2: Agenda
Agenda Barry Callebaut at a glance Highlights H1 2009/10 and strategy going forward Financial and operational performance Outlook June 2010 Barry Callebaut - Roadshow presentation 2
Slide 3: Active along the entire cocoa and chocolate value chain
Barry Callebaut is active along the entire cocoa and chocolate value chain Cocoa Semi-finished Products Chocolate Products Sugar 100% Retail Milk customers Other Consumer Products Liquor for Chocolate via Industrial Shells/ chocolate Couverture customers waste ~50% Butter Artisanal 100% customers 20
Slide 4: Barry Callebaut at a glance
Barry Callebaut at a glance FY 2008/09 World leader in high-quality cocoa and chocolate Net revenue: CHF 4.9 bn products and outsourcing partner of choice, with over 40% share in the open industrial chocolate market Consumer Cocoa World’s largest supplier of Gourmet & Products 17% 11 %15% Specia
Slide 5: Cocoa, dairy, and sugar are the most important raw materials we source
Cocoa, dairy, and sugar are the most important raw materials we source Barry Callebaut business model 100g chocolate tablet contains: Gourmet & Milk Dark Consumer 20% price lists Products Cocoa liquor 11g 44g regular Cocoa butter 24g 12g updates Milk powder 22g - 80% Cost Plus Sugar 42g 43g Higher r
Slide 6: West Africa is the world's largest cocoa producer – BC sources locally
West Africa is the world’s largest cocoa producer – BC sources locally Total world harvest (08/09): 3 456 k MT World total harvest: (08/09): 3456 K MT Others Dominican Republic 1% 9% BC sources ~540k MT/y (08/09) cocoa, thereof 65% directly from Papa New Guinea 2% farmers, cooperatives & local tra
Slide 7: Agenda
Agenda Barry Callebaut at a glance Highlights H1 2009/10 and strategy going forward Financial and operational performance Outlook June 2010 Barry Callebaut - Roadshow presentation 7
Slide 8: Challenging market environment
Challenging market environment Global chocolate market down in volume by -1.4%, picking up since early 2010 Chocolate confectionery market – Sep 09-Jan/Feb 10 08/09 09/10 -1.4% 1,685,852 1,662,944 • Western Europe: first signs of recovery • USA: negative trend slows down • Eastern Europe: continues
Slide 9: Raw material price development: prices high and volatile
Raw material price development Prices are high and volatile – recently slightly easing London Cocoa 2nd Position Daily High, Low, Close (in £/ton) London Cocoa 2nd Position – Daily high/ low close, £/tonne Av. Price for whiteav. sugar (communicated Price for white sugar withinby theEU sugar producer
Slide 10: Combined ratio low, increasing since mid-february
Raw material price development Combined ratio low, increasing since mid-february European Cocoa powder-butter combined ratio*ratios - 6 months – European fwd ratios 6 against months Liffeagainst LIFFE forward EU powder EU butter Combined ratio 4.50 4.00 3.50 3.00 Butter - Powder - Combined 2.91 May
Slide 11: Staying focused on Food Manufacturers, increasing emphasis on Gourmet
Confirmed growth strategy Staying focused on Food Manufacturers, increasing the emphasis on Gourmet “Heart and engine of the chocolate industry” Vision Chocolate expert and business partner of choice Number one chocolate company Geographic expansion Sustainable, Strategic Innovation profitable
Slide 12: Growth comes from new regions & outsourcing deals
Geographic expansion Growth comes from new regions & outsourcing deals Barry Callebaut share in sales volumes in % of total (chocolate and cocoa) June 2010 Barry Callebaut - Roadshow presentation 12
Slide 13: Stepping up controlled fermentation
Innovation Stepping up controlled fermentation… What is “Controlled Fermentation” Full control of the cocoa bean fermentation by the addition of a specific microbial starter culture mix at the beginning of the fermentation step, with the aim to provide a constant and predictable high cocoa bean qual
Slide 14: Factory costs on per tonne activity down by 5%
Cost leadership Factory costs on per tonne activity down by 5%* E Capacity utilization for liquid chocolate: up from 79.4% to 82.5% Energy consumption per tonne activity: down by 7% CO2 per tonne activity down by 5.4% Headcount in factories and logistics: down by -4.7% despite volume increas
Slide 15: Main growth drivers support our strategy
3 Main growth drivers support our strategy • The Professional segment is a very Gourmet fragmented … market to be further developed. Currently only 13% of BC‘s business. • Chocolate players currently outsource Outsourcing only…10-12% of their … total production, with high potential to be increased •
Slide 16: Gourmet & Specialties: preferred solutions provider for chocolate professionals
Barry Callebaut’s Gourmet & Specialties business: The preferred solutions provider for chocolate professionals – up 18.1% in sales volume Picture 1 to be added: our Picture 2 to be added: our products customers >200 chocolates used as 100,000+ premium artisan users ingredient by professionals
Slide 17: Additional market outsourcing potential between 250,000 and 500,000 tonnes
Additional market outsourcing potential between 250,000 and 500,000 tonnes Top 11 Manufacturers of Industrial Chocolate Total global industrial yearly (in '000 tonnes) chocolate production is estimated at 5.5 million tonnes Barry Callebaut The top five players (w/o BC) Nestlé account for about h
Slide 18: Chocolate consumption in LATAM and Asia Pacific has high growth potential
Chocolate consumption in LATAM and Asia Pacific has a high growth potential Global Chocolate Market 90.0% 80.0% Market shares of top 3 players 2009 Australasia 70.0% North America 60.0% Latin America 50.0% Middle East and 40.0% Africa 30.0% Asia Pacific Eastern Europe Western Europe 20.0% 10.0% 0.0%
Slide 19: Agenda
Agenda Barry Callebaut at a glance Highlights H1 2009/10 and strategy going forward Financial and operational performance Outlook June 2010 Barry Callebaut - Roadshow presentation 19
Slide 20: All regions contributed to growth
Volumes – 1H 2009/10 All regions contributed to growth Sales volume in ‘000 Metric tonnes Sales volumes up 7.8% in a Change 1H 09/10 1H 08/09 still fragile economic in % environment Group +7.8% 659.5 611.9 Volumes in Europe Global +10.2% 105.9 96.1 increased in the wake of Sourcing & recessionar
Slide 21: Global Sourcing and Cocoa
Global Sourcing and Cocoa Good volume growth but depressed combined cocoa ratio impacting profit Volume sold to third-party Volume EBIT customers increased by 10.2% to 105,886 tonnes, driven +10.2% -26.3% (- 28.9% in loc curr.) primarily by strong cocoa powder sales in the Americas Combined (for
Slide 22: Europe: strong volume and EBIT growth
Europe Strong volume and EBIT growth Market demand in Volume EBIT Western Europe showing slight recovery, Eastern +4.6% +13.1% (+ 17.0% in loc curr.) Europe still affected by crisis in Russia Gourmet business with good development stemming from recovering markets, share gains and the integration
Slide 23: Americas: continued strong growth, profit pressure
Americas Continued strong growth, profit pressure Chocolate market with Volume EBIT mixed signs, improving in +13.1% -12.2% some segments, other still (-5.5 % in loc curr.) depressed (e.g. foodservice full-service restaurants) Strong volume growth driven by - Implementation of outsourcing contra
Slide 24: Asia-Pacific: recovering customer demand and growth
Asia-Pacific Recovering customer demand and growth with new customers Markets starting to Volume EBIT recover, with the exception of Japan +24.4% -58.0% Gourmet & Specialties (-58.0 in loc. curr.) products saw a +55.7% adj. for scope double-digit sales volume increase Excluding the CHF One-off
Slide 25: CAPEX development: back at sustainable levels
CAPEX development: Back at sustainable levels mCHF Additional growth IT 250 Upgrade / efficiency gains existing sites Maintenance 153 144 ~127 Ongoing 115 level 2005/06 2006/07 2007/08 2008/09 2009/10 PLAN June 2010 Barry Callebaut - Roadshow presentation 25
Slide 26: Agenda
Agenda Barry Callebaut at a glance Highlights H1 2009/10 and strategy going forward Financial and operational performance Outlook June 2010 Barry Callebaut - Roadshow presentation 26
Slide 27: Financial targets for 3-year period 2009/10-2011/12
Outlook: Financial targets for 3-year period 2009/10-2011/12 Annual growth targets on average* for 2009/10 through 2011/12: Volumes: 6-8% EBIT: at least in line with volume growth *Our view for the 2009-2012 period reflects current economic forecasts for the markets we operate in as well as in
Slide 28: Summary
Summary Ongoing robust growth Emerging markets developing well Excellent growth in high-margin Gourmet & Specialties business Solid operational improvements Global chocolate market expected to slowly recover in 2010; combined cocoa ratio to improve Three-year financial targets confirmed June 2010 Ba
Slide 29: Back-up
Back-up June 2010 Barry Callebaut - Roadshow presentation 29
Slide 30: Stable financing situation due to long-term secured credit-lines
Stable financing situation due to long-term secured credit-lines Financing and liquidity situation as at Feb 28, 2010 [CHF m] 2500 Short-term >CHF 650 various uncommitted 2000 facilities Maturity 2012 (17%) 1500 EUR 850 2013 (83%) CHF m Syndicated 260 bank loan ABS receivable financing (14 banks) 36
Slide 31: BC doubles network to 40 factories in 5 years
Geographic expansion: BC doubles network to 40 factories in 5 years Chekhov, Russia (September 2007) Netherlands Sweden Stollwerck, Germany Luijckx (2004) (2002) (2003) Belgium Canada 1 UK Switzerland Robinson, U.S. Jacques, Belgium (2008) Morinaga, Osaka, Japan (2002) Nappa, U.S. Dijon, France (200
Slide 32: West Africa is the world's largest cocoa producer – BC sources locally
West Africa is the world’s largest cocoa producer – BC sources locally Total world harvest (08/09): 3 456 k MT World total harvest: (08/09): 3456 K MT Others Dominican Republic 1% 9% BC sources ~540k MT/y (08/09) cocoa, thereof 65% directly from Papa New Guinea 2% farmers, cooperatives & local tra
Slide 33: Third year of cocoa deficit despite decreased grinding volumes
Third year of cocoa deficit despite significantly decreased grinding volumes Cocoa production versus consumption Crop year Gross crop Grinding Surplus/d End of eficit* season stock 2005/06 3776 3508 239 1891 2006/07 3426 3658 -266 1625 2007/08 3718 3743 -62 1563 2008/09 3456 3494 -73 1490 *Current n
Slide 34: Financial summary H1 2009/10: strong growth continues
Financial summary H1 2009/10 Strong growth continues Ongoing strong sales volume growth: up 7.8% Gourmet & Specialties: excellent sales volume growth of 18.1% Sales revenue up 8.4% in local currencies Solid operational improvements offset by lower combined cocoa ratio, adverse currency effec
Slide 35: Implementing our 3-pillar strategy
Strategic highlights of the past 12 months: Implementing our 3-pillar strategy April 2009 February 2010 Barry Callebaut Barry Callebaut Brazil S/A, and October 2009 appointed as exclusive Bunge signed a Barry Callebaut joins supplier to Belgian’s February 2009 UTZ Certified cocoa premier praline bra
Slide 36: Innovation in the field and in the research labs
Innovation …in the field and in the research labs West Africa: Field implementation fermentation technique combined with farmer training Optimizing fermentation technique (efficiency & cost reduction) Starterculture modifications - the impact of yeasts on flavor Development of functional coc
Slide 37: Certified chocolate products
Sustainability Certified chocolate products What is “Certification” The procedure by which a third party that is neither the provider nor the customer gives written assurance that a product or service conforms to specific requirements. Best known certification schemes Our position on certification 1
Slide 38: Working directly with cocoa farmers
Sustainability Working directly with cocoa farmers “Quality Partner” program in Côte d’Ivoire – since 2005 A partnership with farmer cooperatives that aims to: Provide farmers with greater economic security Premium for better quality Pre-financing Strengthen farmer cooperatives Increas
Slide 39: Key Figures 1H 2009/10
Key Figures 1H 2009/10 Strong growth continues Change Change 1H 1H In local currencies 2009/10 2008/09 Sales volume [in tonnes] 7.8% 659'536 611'920 Sales revenue [CHF m] 8.4% 4.5% 2'656.5 2'543.1 CHF per tonne 0.6% -3.1% 4'028 4'156 Gross profit [CHF m] 4.6% 1.9% 390.3 383.2 CHF per tonne -2.9% -5.
Slide 40: Gross Profit: strong operational performance
Gross Profit – 1H 2009/10 Strong operational performance… in CHF m +19.2 -2.4 -23.2 +22.3 +1.8 -10.6 390.3 383.2 Gross Profit Volume Product Operational Scope effects Cocoa processing Negative Gross Profit 1H 2008/09 effects mix / Price improvements and non-recurring impact currency 1H 2009/10 items
Slide 41: EBIT: cost under control
EBIT – 1H 2009/10 …and cost under control in CHF m +7% +17.6 -11.2 +7.9 232.9 -18.1 218.6 -6.0 208.8 EBIT Additional Additional SG&A Overhead EBIT before Scope effects Negative EBIT 1H 2008/09 Gross Profit from business efficiency Scope, non- and non-recurring currency 1H 2009/10 (excl. FX) growth g
Slide 42: Substantially lower average interest expense
Below EBIT - Net financial expense: Substantially lower average interest expense Avg. interest rate CHF m 5.6% 3.45% 50 47.3 3.7 42.5 45 2.4 40 5.4 35 30.9 30 25 20 15 10 5 0 Net interest Net interest Bank charges, Losses on Exchange rate Net financial expense 1H expense 1H fees and other derivative
Slide 43: From EBIT to PAT: lower financial expense & tax rate
From EBIT to PAT: Lower financial expense & tax rate 1H 1H Change 2009/10 2008/09 in % Operating Profit (EBIT) CHF m -4.5 208.8 218.6 in local currencies CHF m -1.7 214.9 Financial expense, net CHF m -14.8 (42.5) (49.9) Income taxes CHF m -16.8 (21.3) (25.6) Tax rate in % 12.8% 15.2% Net Profit for
Slide 44: Cash Flow: seasonal investments in working capital
Cash Flow – 1H 2009/10 Seasonal investments in Working Capital mCHF First 6-months 2008/09 First 6-months 2009/10 300 +33% 272.2 -330.0 (+67.2) 250 205.0 -251.2 200 150 100 50 0 -50 -100 -44.5 -75.9 +129.6 -150 -12.2 -5.5 +139.8 -33.2 +5.9 Operating Investment Capital Acquisitions Other CF Cash Oper
Slide 45: Global project to reduce working capital
Working Capital – 1H 2009/10 Global project to reduce working capital in mCHF +93.5 -79.5 +40.1 +1.1 1′218.4 +22.1 1′143.2 Stock volume DSO -1%* changes in %: DPO -3%** (Target -5%) -Beans +6% (Target +10%) (Target -3%) -Semi-finished -20% (-10%) -Finished -14% (-10%) *DSO = Trade receivables / 2-mo
Slide 46: Net debt reduced – strong financial ratios
Balance sheet 1H 2009/10 Net debt reduced – strong financial ratios mCHF Change Feb 10 Feb 09 [%] absolute Total assets 9.8% 363.5 4'068.0 3'704.5 Net working capital 6.6% 75.2 1'218.4 1'143.2 Non-current assets 5.3% 73.0 1'457.2 1'384.2 Net debt -2.1% -23.5 1'093.4 1'116.9 Shareholders' equity 12.6
Slide 47: Continues to generate significant Economic Value
EVA 1H 2009/10 Barry Callebaut continues to generate significant Economic Value EVA defined as measure to determine the value created above the return required by shareholders mCHF CAGR 1.7% 200 185 182 168 150 95 90 EVA 87 100 50 92 Notional Capital Charge** 81 90 * WACC = 8% 0 1H 1H 1H 2007/08 200
Slide 48: P&L overview: solid financial results
P&L overview Solid financial results % change 1H 2009/10 1H 2008/09 Revenue from sales and services CHF m 4.5% 2'656.5 2'543.1 in local currencies 8.4% 2'756.2 Gross Profit CHF m 1.9% 390.3 383.2 in local currencies 4.6% 400.9 EBITDA CHF m -2.8% 260.5 268.1 in local currencies 0.1% 268.3 EBIT CHF m
Slide 49: Americas and Europe biggest absolute growth contributors
Americas and Europe are biggest absolute growth contributors in 1H 09/10 Sales volume distribution 1H 2009/10 Sales volume growth 1H 2009/10 [000 MT] [000 MT] Group: 659.5 Group: 47.6 Global 9.8; 21% Global 24.4; 4% 105.8; Sourcing & 4.8; 10% Sourcing & 136.8; 16% Cocoa Cocoa 21% Europe Europe 15.9;
Slide 50: Industrial Business: continued strong volume growth
Industrial Business Continued strong volume growth Food Manufacturers Cocoa Volume Volume +8.6% +10.2% 450 120 Sales volume up, 400 100 driven by all regions 350 and continued Volume in 000 MT Volume in 000 MT 300 80 implementation of 250 200 60 outsourcing deals 411.1 96.1 105.9 378.6 150 40 100
Slide 51: Gourmet & Specialties with strong growth
Food service / Retail Gourmet & Specialties with strong growth Gourmet & Specialties Consumer products Volume Volume +18.1% -7.3% Sales of Gourmet 80.0 90 70.0 70.9 80 77.2 71.6 products up thanks to 60.0 60.0 70 focused growth Volume in 000 MT Volume in 000 MT 50.0 60 (adjusted product 40.0 50 po
Slide 52: 5-year performance
5-year performance Continuous and stable growth of top- and bottom line Volume in 000 metric tons (MT) EBIT in CHF m EBIT/ 245 302 306 293 289 MT 1166 1214 351 1052 1059 324 341 977 295 258 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Net profit in CHF m * Return on capital in % 19.5 17.7 18.1
Slide 53: Cautionary note
Cautionary note Certain statements in this Letter to Investors regarding the business of Barry Callebaut are of a forwardlooking nature and are therefore based on management’s current assumptions about future developments. Such forward-looking statements are intended to be identified by words such a