Barry Callebaut Ag · SIX:BARN
Barry Callebaut — FY2024 Earnings Presentation
42 slides from Barry Callebaut's earnings presentation, Nov 6, 2024
Slide 1: Barry Callebaut FY 23/24
Barry Callebaut Successfully navigated unprecedented market challenges, delivering on BC Next Level milestones FY 23/24, November 6, 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: Progressing step by step
Progressing step by step 1 Confirming our growth strategy Demonstrated resilience with FY 23/24 results, despite disrupted environment 2 and new operational rigor on quality & food safety 3 Achieved major milestones for BC Next Level 4 Navigating market challenges as we move to the second year of BC
Slide 4: Our long-term Strategic Growth Priorities are the right way to win
Our long-term Strategic Growth Priorities are the right way to win 1 2 3 4 Deepen Scale up ‘Fair share’ outsourcing Gourmet 2.0 Specialties in AMEA partnerships 2 out of 3 2x 2x 2x win-rate of new underlying Gourmet size of Specialties size of AMEA partnership volumes market growth business business
Slide 5: Growth priorities starting to drive performance
Growth priorities starting to drive performance 1 Deepen outsourcing 2 3 Scale up 4 ‘Fair share’ partnerships Gourmet 2.0 Specialties in AMEA • ~35 kMT annualized • +9.8% volume in 23/24, • Defined scope to focus • +11.5% volume in H2 volume won in 23/24 broad-based demand on winning portfolio • Inc
Slide 6: Cocoa crop outlook: 24/25 vs. 23/24
Cocoa crop outlook: 24/25 vs. 23/24 Overall expect a slight surplus in 24/25: supply well ahead of 23/24, but below 22/23 Farm investment Ghana/ Pod Ivory Weather Disease Coast Demand counts Rest of World BC well-positioned to secure supply given origin footprint and cocoa/chocolate integration The
Slide 7: Navigating long-term supply environment & rising sustainability requirements via two-pronged approach
Navigating long-term supply environment & rising sustainability requirements via two-pronged approach Smallholder farming Large scale, high-tech farming “North Star” strategy Future Farming Initiative (FFI) • Radical transformation of smallholder cocoa farming • Scaling sustainable, high-tech cocoa
Slide 8: Unlocking BC’s full potential
Unlocking BC’s full potential From Ingredients Supplier to Recognized Chocolate Solutions Advisor 2023/24 2024/25 2025/26 BC Next Level BC Next Level delivery: Digital BC Foundations Start digitalizing & launch customer experience Living customer experience • GBS • Identifying further opportunities
Slide 9: Making Net Promoter Score (NPS) the critical metric for BC
Making Net Promoter Score (NPS) the critical metric for BC Market share, volume and EBIT are driven by great customer experiences For BC, customer experience & NPS is a result of delivering best-in-class: Value Service Sustainability Quality/ Food Safety The World’s Best Chocolate Solutions 9
Slide 10: FY 23/24 performance
FY 23/24 performance The World’s Best Chocolate Solutions 10
Slide 11: Successfully navigated unprecedented market challenges
Successfully navigated unprecedented market challenges 1 Significantly disrupted supply & demand environment over the past year 2 Demonstrating resilience with flat volumes for FY 23/24, ahead of a declining market 3 Solid EBIT1 growth reflects strength of cost-plus model Solid operational FCF impro
Slide 12: Cocoa market reaching unprecedented levels in 23/24, with recent signs of stabilization
Cocoa market reaching unprecedented levels in 23/24, with recent signs of stabilization London cocoa futures (in GBP/MT)1 • Record futures prices in 23/24, closing the 12,000 End of End of year at GBP 5,332 (vs. GBP 2,950 in 22/23) FY 22/23 FY 23/24 • Some price normalization over recent 10,000 mont
Slide 13: Attractive global chocolate consumer market, expect some short-term pressure
Attractive global chocolate consumer market, expect some short-term pressure as customers price to retail Cocoa grinding volume (in kMT) Favorable mid-term market trends remain intact 5,500 • New consumers in emerging markets • Chocolate in more product categories • Demand for premiumization, innova
Slide 14: BC volumes resilient in a declining and volatile market
BC volumes resilient in a declining and volatile market Volume growth • Phasing of Gourmet customer purchases • Mexico intervention +1.0% +0.0% +0.4% -0.3% +1.3% -1.2% +0.7% +0.5% +0.3% -0.2% -0.7% -1.1% -1.4% -1.4% -3.3% Group Global Chocolate Global Cocoa FY FY 23/24 23/24 Q1 23/24 Q2 23/24 Q3 23/
Slide 15: Accelerating in AMEA and outgrowing the market in most Chocolate regions
Accelerating in AMEA and outgrowing the market in most Chocolate regions through diversified portfolio Global Chocolate sales volume: +0.3% FY (vs. -1.1% market1) FY volume growth % of Group FY volume BC Market1 Western Europe +0.8% -1.2% 32% Central and Eastern Europe -1.2% +0.3% 13% North America
Slide 16: +12.7% EBIT reflects mix, finance costs pass through & initial BC Next Level savings
+12.7% EBIT reflects mix, finance costs pass through & initial BC Next Level savings In CHF million +12.7% 103 743 -20 659 -38 Includes ~CHF 18M 446 BC Next Level savings, in line with -258 planned year-end run rate Of which CHF 171M represent cash- relevant BC Next Level one-offs EBIT FY 22/23 Gros
Slide 17: Recurring net profit largely protected through our cost-plus model
Recurring net profit largely protected through our cost-plus model In CHF million +12.7% Slightly impacted by 743 longer pricing cycle in Gourmet & quality costs 659 -2.0% 446 243 434 443 -296 243 191 -255 EBIT FY 22/23 EBIT FY 23/24 One-offs EBIT FY 23/24 Financial Net profit One-offs & Net profit
Slide 18: We delivered key BC Next Level milestones, but still have a significant journey ahead
We delivered key BC Next Level milestones, but still have a significant journey ahead Cost savings One-time Opex Capex Capital Benefits • ~15% year-end run rate CHF 171M (excl. non-cash ~CHF 100M supported by relevant items) >CHF 200M planning & operational • CHF 18M savings delivered FY 23/24 alrea
Slide 19: Operational FCF improvements more than offset by the substantial bean price impact
Operational FCF improvements more than offset by the substantial bean price impact on working capital In CHF million 290 317 355 266 113 -2,331 50 Solid operational improvement 675 829 driven by planning and operational 519 611 648 622 excellence -280 -281 -275 -276 -241 -347 -13 -18 -80 -322 Increa
Slide 20: FCF pressure fully driven by working capital impact of higher bean prices
FCF pressure fully driven by working capital impact of higher bean prices & initial margin payments London cocoa future 2nd Initial margin required by continuation (in GBP/MT) exchange (1st continuation, GBP/MT) CHF -2.8bn bean price impact 12,000 1,800 on FCF in FY 23/24 driven by: 1,600 10,000 1,4
Slide 21: The increase in Net Debt is entirely driven by higher inventory value
The increase in Net Debt is entirely driven by higher inventory value due to bean-price acceleration Net Debt (in CHF million) Total Inventory (in CHF million) +2,696 5,622 +2,509 3,818 2,926 1,309 Net debt FY 22/23 Net debt FY 23/24 FY 22/23 FY 23/24 Cocoa bean stocks (RMI) Semi finished & finished
Slide 22: Investing for the future, whilst focusing on deleveraging
Investing for the future, whilst focusing on deleveraging Liquidity actions in FY 23/24 ensure flexibility in current market environment Deleveraging mid-term towards Net Debt/EBITDA <2x Drive Invest in future growth BC Next Level Dividend Focusing on our four strategic Including manufacturing Ensur
Slide 23: Continuing to drive operational progress, but FY 24/25 FCF also depends on bean price
Continuing to drive operational progress, but FY 24/25 FCF also depends on bean price developments Moving parts for FY 24/25 FCF: • Cocoa bean prices expected to remain well-above historical averages, key driver of cash evolution • Operational improvements, with ~CHF 80M BC Next Level capital benefi
Slide 24: BC Next Level update
BC Next Level update The World’s Best Chocolate Solutions 24
Slide 25: Confirming CHF 250M synergies (75% flow through) and CHF 500M net investments
Confirming CHF 250M synergies (75% flow through) and CHF 500M net investments Cost savings of CHF 250M, with 75% flowing to Total net investments of CHF 500M confirmed bottom-line Reducing cost to serve by streamlining factories and improving performance -280 Eliminating complexity in the supply cha
Slide 26: Delivering step by step: important milestones achieved so far in FY 23/24
Delivering step by step: important milestones achieved so far in FY 23/24 • Social plans completed in 6 locations • ~25% SKUs phased out (vs. >30% target) Value • Factory footprint: 2 closed, 1 planned closure announced • Stepped up quality testing and controls Service • BCOS1 launched to standardiz
Slide 27: Step changing quality & food safety culture at BC
Step changing quality & food safety culture at BC To date • Immediate firewall towards customers: 100% Positive Product Release • Testing frequency: 5x higher • Volume tested by sample: Increased >35% • Culture & capabilities: tone from the top, organization & accountabilities In process • Quality &
Slide 28: Significant progress made to simplify ways of working through GBS
Significant progress made to simplify ways of working through GBS (Global Business Services) Łódź (Poland) Monterrey (Mexico) opened in June Kuala Lumpur (Malaysia) Hyderabad (India) opened in September Focus on knowledge management build up: 650+ process maps created, 50+ strategic workshops with f
Slide 29: Significantly ramping up organizational capabilities
Significantly ramping up organizational capabilities Step changing customer experience Recognized Chocolate Solutions Advisor Enabled by: • Boosting understanding of customer needs • Best-in-class mindset and organizational capabilities • Digital end-to-end connectivity Ingredients Supplier The Worl
Slide 30: Linking rewards to strategy
Linking rewards to strategy Short-term incentive FY 23/24 FY 24/25 • Tying incentives to strategy as we enter second year of our transformation • Volume • Volume • EBIT • EBIT • FCF • FCF • Sustainability • BC Next Level Transformation • Focusing STI on key financial metrics Long-term incentive • Ad
Slide 31: Significant work still ahead of us
Significant work still ahead of us 2023/24 2024/25 2025/26 • Hardwire & Standardize • GBS • Full digitalization • RACI – empower & collaborate • Factory Network • Boosting NPS/Culture • Simplify BC • Delivering SG&A • Commercial Excellence • Quality • EUDR • Finance Transformation • Executive Leader
Slide 32: Outlook
Outlook The World’s Best Chocolate Solutions 32
Slide 33: Confirming our trajectory for FY 24/25
Confirming our trajectory for FY 24/25 Flat volume growth in a challenging market, with slightly positive growth for Global Chocolate • Defending our market share in a difficult environment and heaviest ever transformation of BC • Cocoa-related price increases impacting market demand • Growth expect
Slide 34: Post BC Next Level and digital transformation, delivering attractive long-term growth
Post BC Next Level and digital transformation, delivering attractive, profitable long-term growth MSD+ to HSD1 LSD+ to MSD1 Volume growth EBIT growth Long-term growth objectives The World’s Best Chocolate Solutions 34 1 Low Single-digit Plus to Mid Single-digit Volume growth and Mid Single-digit Plu
Slide 35: Concluding remarks
Concluding remarks 1 Confirming our growth strategy Demonstrated resilience with FY 23/24 results, despite disrupted environment 2 and new operational rigor on quality & food safety 3 Achieved major milestones for BC Next Level 4 Navigating market challenges as we move to the second year of BC Next
Slide 36: Appendix
Appendix The World’s Best Chocolate Solutions 36
Slide 37: Raw material price developments
Raw material price developments Indexed Raw material price changes January 2023 to August 31, 2024 600% 500% 268% Cocoa beans 400% 102% Milk powder 300% 200% 100% Sugar world 100% 54% Sugar EU 0% 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 In CHF million +7.7% 115 -11 1,452 -70 1,349 -1 1,382 Gross profit Volume Pricing & Mix Cocoa Gross profit FX Gross profit FY 22/23 FY 23/24 FY 23/24 in LC The World’s Best Chocolate Solutions 38
Slide 39: Structurally long industry working capital cycle
Structurally long industry working capital cycle Indicative cash cycle Official cash cycle <9 months prior Day 0 ~6 months Bean purchase Purchase of Payment of Creation of Delivery of Payment of contract inventory inventory sales contract products products Inventory Days Hedge back-to-back via short
Slide 40: Key figures
Key figures Change in % Group performance (in CHF million) FY 2023/24 in local currencies in CHF Sales volume (in tonnes) 2,279,811 n/a 0.0% Sales revenue 10,386.3 28.1% 22.6% Gross profit 1,382.3 7.7% 2.5% EBIT reported 446.1 -26.8% -32.3% EBIT (recurring)1 704.4 12.7% 6.8% EBIT per tonne (in CHF,
Slide 41: Balance sheet
Balance sheet (in CHF million) Aug’24 Aug’23 Net working capital 3,808 1,466 Non-current assets 2,979 2,911 Total assets 15,159 8,433 Net debt 3,818 1,309 Adj. Net debt¹ 1,124 41 Shareholders’ equity 2,839 2,896 ROIC reported 6.6% 13.1% ROIC (recurring)² 11.0% 13.1% ROE reported 6.7% 15.3% ROE (recu
Slide 42: World’s Best Chocolate Solutions
World’s Best Chocolate Solutions The World’s Best Chocolate Solutions 42