Barry Callebaut Ag · SIX:BARN
Barry Callebaut — H1 2023/24 Earnings Presentation
42 slides from Barry Callebaut's earnings presentation, Apr 10, 2024
Slide 1: Progressing as planned: Solid H1 performance, BC Next Level on track
Barry Callebaut Progressing as planned: Solid H1 performance, BC Next Level on track 10 April 2024
Slide 2: Disclaimer
Disclaimer Certain statements in this presentation regarding the business of Barry Callebaut are of a forward-looking 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 as ‘believe,
Slide 3: Key messages
Key messages Resilient +0.7% volume growth in H1 in a challenging market (+1.0% Q2), 1 recurring1 net profit +0.8% in local currencies 2 Executing on our long-term Strategic Growth Priorities 3 On track to deliver BC Next Level commitments 4 Cautiously navigating unparalleled cocoa price & supply en
Slide 4: Starting to deliver on long-term Strategic Growth Priorities
Starting to deliver on long-term Strategic Growth Priorities 1 Deeper outsourcing 2 3 Scale up 4 ‘Fair share’ partnerships Gourmet 2.0 Specialties in APAC • Quality interventions • Appointed commercial • Redefined specialty • Slightly negative H1 and processes in place excellence leaders strategy pi
Slide 5: We are on track to deliver BC Next Level
We are on track to deliver BC Next Level H1 2023/24 Closer to customers & markets Simplify & digitalize BC 1 New operating model in place from January 1st 2024 4 15% cost savings announced on September 6th 2023, • Country clusters & GMs established further detailed on February 26th 2024 • End-to-end
Slide 6: Unprecedented market disruption with terminal market moving from 2,900 to ~7,800 GBP/MT
Unprecedented market disruption with terminal market moving from 2,900 to ~7,800 GBP/MT in six months London cocoa future 2nd continuation (in GBP/ MT) 9000 7,852 GBP • Record future prices, butter ratios and powder prices BC Capital Markets Day 8000 as of 9th April 2024 7000 • Triggered by supply c
Slide 7: BC navigating supply challenges
BC navigating supply challenges Supply Demand Financials • Some industrials less covered and • Short-term market softness (-2.0% • Significant bean price impact on late, creating upward pressure on H1 market1 growth) impacted by working capital requirements terminal market in 2024 industry-wide Mark
Slide 8: Barry Callebaut H1 performance
Barry Callebaut H1 performance The World’s Best Chocolate The World’s Solutions Best Chocolate Solutions
Slide 9: Solid performance in a challenging market
BC H1 PERFORMANCE Solid performance in a challenging market Resilient +0.7% volume growth in H1 (+1.0% Q2), with strong momentum in 1 Gourmet Profitability protected through cost-plus pricing model. Recurring1 EBIT 2 +7.9% in constant currency, recurring1 net profit +0.8% Executing BC Next Level as
Slide 10: Impact of cocoa market disruption on BC financials
BC H1 PERFORMANCE Impact of cocoa market disruption on BC financials Top-line Bottom-line Free cash flow • +0.7% volume H1 (+1.0% Q2) • Recurring2 net profit per • ~CHF 1.1bn negative bean tonne (local currencies) impact on working capital • Food Manufacturers: +0.1% in protected through cost-plus Q
Slide 11: Positive H1 Group volume growth and Q2 improvement, driven by strong demand for Gourmet
BC H1 PERFORMANCE Positive H1 Group volume growth and Q2 improvement, driven by strong demand for Gourmet Group Sales volume: +0.7% H1 (+0.4% Q1, +1.0% Q2) % of Group Q1 volume growth Q2 volume growth H1 growth drivers H1 volume BC Market1 BC Market1 Food Soft consumer demand in the context of the M
Slide 12: Volume positive across most Chocolate regions in Q2
BC H1 PERFORMANCE Volume positive across most Chocolate regions in Q2 Chocolate sales volume: +1.0% H1 (+0.7% Q1, +1.3% Q2) % of Group Q1 volume growth Q2 volume growth H1 growth drivers H1 volume BC Market1 BC Market1 Capturing the consumer shift from Food Western Europe +4.7% -3.7% -0.4% -1.0% Man
Slide 13: +7.9% recurring EBIT reflects financing costs pass through as well as volume/mix
BC H1 PERFORMANCE +7.9% recurring EBIT reflects financing costs pass through (offset below EBIT) as well as volume/mix +7.9% In CHF million 57 376 348 -29 -161 178 -37 Of which CHF 91.5M non-cash impairments & write-downs EBIT HY 2022/23 Gross Profit SG&A, Others EBIT HY 2023/24 One-offs FX EBIT HY
Slide 14: Cost-plus pricing model supported profitability
BC H1 PERFORMANCE Cost-plus pricing model supported profitability In CHF million Of which CHF 91.5M non-cash impairments & write-downs In line with volumes, +7.9% securing profit through cost-plus 376 ETR 348 HY 2023/24: 27.6% (recurring1 17.6%) HY 2022/23: 18.7% +0.8% 20 236 234 139 -161 178 -37 13
Slide 15: Operational free cash flow offset by ~CHF 1.1bn bean price impact
BC H1 PERFORMANCE Operational free cash flow offset by ~CHF 1.1bn bean price impact and BC Next Level investment step up In CHF million • Negative free cash flow almost entirely driven by -41 99 significant bean price increase (est. CHF 1.1bn impact) -96 -141 -50 -188 • Long cycle (~12-18 months) be
Slide 16: Higher net debt due to the significant bean impact
BC H1 PERFORMANCE Higher net debt due to the significant bean impact In CHF million 53 2,637 1,116 1,581 159 1,309 Adjustments for beans Step up in working (RMI) capital due to 1,213 significantly higher bean prices 246 -123 -2,392 Adjusted 368 net debt Net debt Dividends Free FX/Others Net debt Adj
Slide 17: Additional financing secured to address the bean impact
BC H1 PERFORMANCE Additional financing secured to address the bean impact Proactively secured liquidity Solid credit ratings • CHF 600M bond issuance to refinance the existing Moody’s S&P Global Ratings EUR 450M senior bond due mid May 2024 • Revolving Credit Facility extension from EUR 900M to EUR
Slide 18: BC Next Level implementation on track
BC Next Level implementation on track The World’s Best Chocolate Solutions 18
Slide 19: We are on track to deliver BC Next Level
BC NEXT LEVEL We are on track to deliver BC Next Level H1 2023/24 Closer to customers & markets Simplify & digitalize BC 1 New operating model in place from January 1st 2024 4 15% cost savings announced on September 6th 2023, • Country clusters & GMs established further detailed on February 26th 202
Slide 20: Country clusters established and supported by global commercial excellence best practices
Closer to customers & markets BC NEXT LEVEL Country clusters established and supported by global commercial excellence best practices 25 country clusters across regions Global commercial excellence Customer-based and localized route-to-market… … complemented by implementation of global commercial ex
Slide 21: Customer Supply & Development driving end-to-end Supply Chain excellence
Closer to customers & markets BC NEXT LEVEL Customer Supply & Development driving end-to-end Supply Chain excellence and scalable solutions Scale up customer-centric Establish best-in-class end-to-end innovations globally across all supply chain process product categories Quality improvements: Reduc
Slide 22: Investing in segregation & traceability, ensuring EUDR compliance
Closer to customers & markets BC NEXT LEVEL Investing in segregation & traceability, creating competitive advantage & ensuring EUDR compliance Select supplying landscape & suppliers through risk assessments Ensuring EUDR compliance by 30 Traceability and December 2024 Farm identification & verificat
Slide 23: Simpler & standardized operating model, optimized footprint, digital ways of working
Simplify & digitalize BC BC NEXT LEVEL Simpler & standardized operating model, optimized footprint, and more seamless digital ways of working Optimizing Increasing headcount Capturing GBS full manufacturing efficiency potential footprint • Prioritize fit-for-purpose • Remove duplication (RACI) • Sta
Slide 24: Transforming to a digitally enabled best-in-class experience
Simplify & digitalize BC BC NEXT LEVEL Transforming to a digitally enabled best-in-class experience for customers, suppliers and employees Vision Uplifting Barry Callebaut’s digital competencies for a sustainable, data-centric, end-to-end connected value chain from cocoa farmers all the way to our c
Slide 25: BC Next Level cost saving phasing on track
BC NEXT LEVEL BC Next Level cost saving phasing on track On track to reach cost savings run-rate Fiscal year-end run-rate cost savings Reducing cost to serve by streamlining factories and improving • Establishing global end-to-end supply chain including performance manufacturing optimization Elimina
Slide 26: Majority of operating expenses related to new operating model and BC Next Level program
BC NEXT LEVEL Majority of operating expenses related to new operating model and BC Next Level program costs In H1 2023/24: Total BC Next Level Opex of CHF 290M • Total BC Next Level one-time costs of CHF 169M • CHF 260M one-time costs (excl. non-cash items) • Mostly non-cash impairments and write-do
Slide 27: Capital expenditure and benefits as planned
BC NEXT LEVEL Capital expenditure and benefits as planned Net Capital Investments split (cumulative over 2022/23 – 2025/26, CHF M) Capital expenditure 490 -280 – Largest investments in footprint optimization (adding capacity to key sites) and quality Working Capital – CHF 90-110M for FY 23/24, likel
Slide 28: Solid category fundamentals, despite cocoa bean increase
Solid category fundamentals, despite cocoa bean increase The World’s Best Chocolate Solutions
Slide 29: Short-term uncertainty with supply challenges expected to ease mid-term
MARKET AND BC POSITIONING Short-term uncertainty with supply challenges expected to ease mid-term … expected to ease Current Supply challenges Short-term uncertainty in the mid-term • West Africa harvest affected by: • While weather uncertainty • In West Africa, higher prices will − El Niño and weat
Slide 30: Cocoa demand has grown consistently despite price fluctuations
MARKET AND BC POSITIONING Over the past 50 years, cocoa demand has grown consistently despite price fluctuations Cocoa grinding volume (in kMT) ICCO global cocoa future price (in GBP/MT) 1 6,000 +2.5% CAGR 0 1971 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 2024 Cocoa g
Slide 31: Steep inflation-linked price increases have had short-term impact on demand
MARKET AND BC POSITIONING Steep inflation-linked price increases have had short- term impact on demand, benefiting Private Label Private Label volume share in Global Global chocolate confectionery growth, 3-monthly, yoy chocolate confectionery market Value growth Price increase Volume growth Period
Slide 32: Resilient volume despite recent inflation, more limited pricing going forward
MARKET AND BC POSITIONING Resilient volume despite recent inflation, more limited pricing going forward given balanced exposure BC supplies a resilient chocolate Balanced growth profile vs. market due Near-term pricing industry to diversified exposure by category ‘21-’23 Price growth Volume growth P
Slide 33: Barry Callebaut outlook
Barry Callebaut outlook The World’s Best Chocolate Solutions 33
Slide 34: We are the trusted and reliable partner for customers
FINANCIAL OUTLOOK We are the trusted and reliable partner for customers during these unprecedented times BC has the right assets to take share Especially in the current environment 1 Market leadership and global scale Global scale • Leading access to beans, with sustainable sourcing 2 Multi-channel,
Slide 35: Reiterate FY23/24 guidance in the context of unprecedented volatility
FINANCIAL OUTLOOK Reiterate FY23/24 guidance in the context of unprecedented volatility Reiterate FY 23/24 outlook • Flat volume growth • Flat EBIT growth on recurring basis in constant currency – excludes one-time BC Next Level costs – includes modest BC Next Level benefits Unprecedented volatility
Slide 36: Concluding remarks
Concluding remarks 1 Solid H1 performance in a challenging market 2 Executing on our long-term Strategic Growth Priorities 3 On track to deliver BC Next Level commitments 4 Cautiously navigating unparalleled cocoa price & supply environment Reiterate FY 2023/24 guidance: flat volume and flat EBIT on
Slide 37: Appendix
Appendix The World’s Best Chocolate Solutions 37
Slide 38: Gross profit increase driven by cost-plus pricing
Gross profit increase driven by cost-plus pricing +9% In CHF million 58 -5 721 -58 664 5 663 Gross profit Volume Pricing & Mix Cocoa Gross profit FX Gross profit HY 2022/23 HY 2023/24 HY 2023/24 in LC The World’s Best Chocolate Solutions 38
Slide 39: Cocoa combined ratio and raw material price development
Cocoa combined ratio and raw material price development European Combined Ratio – 6-month forward ratio Indexed Raw material price changes Jan 2023 to Feb 29th 2024 4.50 260 Cocoa beans 257% 4.00 240 Combined 220 3.50 ratio 3.6x 200 3.00 Butter 180 ratio 160 2.50 140 Sugar world 2.00 120 120% 100 Mi
Slide 40: Bean price increase impacted free cash flow
BC H1 PERFORMANCE Bean price increase impacted free cash flow In CHF million -1.5% -813 467 460 (PY -249) -1,116 (PY -188) -478 -130 (PY -259) (PY -88) -117 -39 -639 (PY -96) (PY +71.2) EBITDA EBITDA Change in Interest & CAPEX Others FCF Feb’24 RMI Beans FCF recurring recurring1 working Income taxes
Slide 41: Balance sheet
BC H1 PERFORMANCE Balance sheet (in CHF million) Feb’24 Aug’23 Feb’23 Net working capital 2,776 1,466 1,699 Non-current assets 2,937 2,911 2,972 Total assets 13,326 8,433 8,185 Net debt 2,637 1,309 1,582 Adj. Net debt¹ 246 41 368 Shareholders’ equity 2,898 2,896 2,896 ROIC reported 7.9% 13.1% 10.8%
Slide 42: World's Best Chocolate Solutions
World’s Best Chocolate Solutions The World’s Best Chocolate The World’s Solutions Best Chocolate Solutions 42