Barry Callebaut AG · SIX:BARN
Barry Callebaut — FY2003/04 Earnings Presentation
62 slides from Barry Callebaut's earnings presentation, Nov 10, 2004
Slide 1: Annual Results 2003/04
Annual Results 2003/04 Analyst Presentation November 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 1
Slide 2: Agenda
Agenda X Highlights 2003/2004 X Financial results X Business review X Industrial Business Segment X Food Service/Retail Business Segment X Performance targets X Proposals to the AGM X Summary for investors NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 2
Slide 3: Cautionary note on forward-looking statements
Cautionary note on forward-looking statements Forward-looking statements Any information given on these slides as well as during the conference call has been prepared by Barry Callebaut solely for the use at this analyst presentation. Certain statements contained therein regarding the business of Ba
Slide 4: Financial Year 2003/04: Strong operating and net profit growth
Financial Year 2003/04: Strong operating and net profit growth X Sales volume topped a million tonnes – up 13.5% to 1’011’358 tonnes and sales revenues exceeded CHF 4 bn for the first time – up 13.4% to CHF 4’049 mio X Strong operating and net profit growth: EBIT at CHF 228.3 mio, up 9.4%; leading t
Slide 5: Major events for Barry Callebaut during FY 2003/04
Major events for Barry Callebaut during FY 2003/04 X Acquisition of Brach’s (September 2003) as platform to grow our consumer business in the US. Integration and restructuring completed. Now focus on new product offerings X Dedicated factory approach expanded to consumer business to accelerate strat
Slide 6: Top-line growth targets achieved
Top-line growth targets achieved reported like-for-like growth growth1) Industrial Business Segment Cocoa tonnes 4,5% 4,5% Food Manufacturers tonnes 2,7% 5,7% Food Service/Retail Business Segment Gourmet & Specialities CHF m 7,9% 3,8% Consumer Products CHF m 47,8% 0,3% BC Group Sales volumes tonnes
Slide 7: Growth in mature markets through innovation & cost leadership
Growth in mature markets through innovation & cost leadership X Innovation in the broadest sense of the word: X Expanding to new geographic markets and increasing market penetration X Continuous launch of “better” products to stimulate consumer and customer demand X Extending the offer to tap new bu
Slide 8: Operational performance by business segments
Operational performance by business segments Industrial Business Food Service / Retail Business X Cocoa X Gourmet & Specialties X Food Manufacturers X Consumer Products Sales volumes Tonnes 650'622 Sales volumes Tonnes 360'737 Sales revenue CHF m 2203.3 Sales revenue CHF m 1845.6 EBIT EBIT 2003/04 C
Slide 9: Agenda
Agenda X Highlights 2003/2004 X Financial results X Business review X Industrial Business Segment X Food Service/Retail Business Segment X Performance targets X Proposals to the AGM X Summary for investors NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 9
Slide 10: Financial summary 2003/04 – P&L
Financial summary 2003/04 – P&L: X Sales revenues increased again strongly by 13.4% to more than CHF 4.0 bn (thereof 5.0% organic) X Sales volume grew 13.5% to more than 1.0 million tonnes (thereof 4.4% organic) X Gross profit jumped 29.9% to CHF 1.5 bn reflecting the changed business portfolio - Gr
Slide 11: Financial Highlights 2003/04
Financial Highlights 2003/04 % change 2003/04 2002/03 Sales Revenue CHF m 13,4 4'048,9 3'571,3 in local currencies 11,7 3'989,0 EBIT CHF m 9,4 228,3 208,7 in local currencies 7,3 224,0 EBIT per tonne CHF/mt -3,6 225,7 234,2 in local currencies -5,4 221,5 Net Profit (PAT) CHF m 12,0 115,6 103,2 in lo
Slide 12: Sales revenue reconciliation FY 2002/03 – FY 2003/04
Sales revenue reconciliation FY 2002/03 – FY 2003/04 374 4'049 (in CHF m) 179 60 3'571 (+5%) -135 Sales Cocoa Volumes Currency Acquisitions Sales by Revenues price (net)1) Revenues impact FY 02/03 FY 03/04 factor - + - + 430 4'049 3'571 60 38 - 50 Sales Cocoa Food Gourmet & Consumer Sales by Revenue
Slide 13: Sales revenue development by business unit
Sales revenue development by business unit 1999/00 – 2003/04 (in CHF m) 4'049 3'571 1'332 (33%) Consumer Products 901 2'622 2'549 2'410 185 476 (13%) Gourmet & Specialities 209 514 424 578 427 1'580 1'639 (40%) Food Manufacturers 1'393 1'392 1'417 (14%) Cocoa 496 620 614 564 441 1999/00 2000/01 2001
Slide 14: Sales revenue by reporting currency
Sales revenue by reporting currency 2003/04 2002/03 60% 63% 7% 3% 4% 20% 8% 13% 6% 3% 7% 6% EUR USD GBP CHF CAD Others NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 14
Slide 15: Steady operational improvement and bottom-line growth
Steady operational improvement and bottom-line growth 250 (in CHF m / CHF) 240 234 X EBIT/ton declined from CHF 234 to CHF 226 228 230 226 X Cocoa, FM and G&S 200 substantially improved 228 220 213 209 X Diluted by moderate EBIT/ton for Brach‘s 210 150 168 173* and unsatisfactory 149 contribution fr
Slide 16: EBIT not correlated to cocoa prices
EBIT not correlated to cocoa prices (in CHF m) (GBP/mt) 250 228,3 2500 208,7 200 168,0 173,2* 2000 148,7 150 130,2 1157 1500 988 100 713 1425 1000 661 619 50 500 0 0 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 EBIT Cocoa price (Closing 31 Aug, Terminal Market Second Position) * Before CHF 80 m r
Slide 17: Very strong Q4 contrasting weak Q3
Very strong Q4 contrasting weak Q3 250 (in CHF m) 2001/02 +9% 2002/03 2003/04 228 200 209* 150 174 +15% 100 +15% 92 +26% 79 50 -38% 67 58 58 51 46 38 32 31 38 20 0 Q1 Q2 Q3 Q4 Full Year * Before CHF 80 m restructuring provision Stollwerck NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analy
Slide 18: Convincing development of profitability ratios
Convincing development of profitability ratios (in CHF m) 250.0 19.0% 17.0% 200.0 15.4% 15.3% 15.0% 14.0% 14.4% 15.0% 13.9% 13.8% 13.6% 150.0 13.9% 13.0% 13.5% 10.4% 9.9% 9.6% 11.0% 100.0 8.9% 8.7% 9.0% 50.0 7.0% 0.0 5.0% 1999/00 2000/01 2001/02 2002/03 2003/04 ROCE ROE ROIC EBIT PAT NOVEMBER 10, 20
Slide 19: Profitability ratios and P&L structure
Profitability ratios and P&L structure 2003/04 2002/03 Profitability Gross Profit / Sales 36,6% 31,9% EBIT / Gross Profit 15,4% 18,3% EBIT / Sales 5,6% 5,8% Comments X Gross Profit/Sales strongly increased mainly due to strategic change in the product mix following the addition of consumer products
Slide 20: Restructuring provisions Stollwerck & Brach's
Restructuring provisions Stollwerck & Brach’s – Usage and closing balance FY 2003/04 (in CHF m) Usage 08/31/04 Stollwerck 25.8 17.6 Brach‘s 19.5 44.1 Comments X The remaining Stollwerck restructuring provision will cover for the announced closure of the Cologne factory and the move of part of the pr
Slide 21: Cash-flow statement
Cash-flow statement (in CHF m) 2003/04 2002/03 Operating cash flow before working capital changes 342,5 310,6 Working capital changes 7,8 (99,6) Cash generated from operations 350,3 211,0 Interest paid, income taxes paid, realized fx gains (net) (112,9) (115,6) Net cash flow from operating activitie
Slide 22: Balance sheet – key ratios
Balance sheet – key ratios change (in CHF m) in % 2003/04 2002/03 Total assets 1,8% 2'760,5 2'712,7 Net working capital -4,3% 914,1 955,1 Net debt -8,5% 943,0 1'030,1 Shareholders' equity 5,5% 800,9 759,2 Comments X Total assets up only 1.8% despite Brach‘s acquisition and adverse currency translati
Slide 23: Balance sheet – key metrics
Balance sheet – key metrics 2003/04 2002/03 Balance Sheet Debt to equity ratio 117,7% 135,7% Solvency ratio 29,0% 28,0% Net debt / EBITDA 2.6x 3.1x Interest cover ratio 3.9x 4.2x NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 23
Slide 24: Development of net working capital & net financial position
Development of net working capital & net financial position (in CHF m) Net working Net debt capital September 1, 2003 955.1 (1'030.1) Exchange effect (20.6) 16.9 Acquisition 63.6 (26.3) Securities 1.5 (0.8) Other (85.5) 97.3 August 31, 2004 914.1 (943.0) Net change (41.0) 87.1 NOVEMBER 10, 2004 Annu
Slide 25: Stock level also driven by safety considerations
Stock level also driven by safety considerations (in tonnes) 08/31/04 08/31/03 OECD 109.288 106.752 Ghana 42.056 18.847 Ivory Coast 5.988 18.810 Cameroon 6.487 7.330 Transit / other 23.641 24.483 BC Group 187.460 176.222 NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 2
Slide 26: A considerably sounder balance sheet
A considerably sounder balance sheet 2002/03* 2003/04* 286 ST-debt Net 459 ST-debt Net Working 955 Working 914 LT- debt incl. Capital LT- debt incl. Capital 660 High Yield bond 575 High Yield bond Fixed Fixed assets 664 assets 746 Equity and 1‘068 Equity and Other 972 other LT- Other other LT- asset
Slide 27: Maturity profile and interest rates
Maturity profile and interest rates X Average cost of interest bearing debt 6.3% X Interest rates for 85% of total debt portfolio fixed/capped for min. 12 months X 90% of long-term debt fixed X Off-balance sheet receivable financing programm at CHF 188 m High Yield (assuming call 2007) Long-term deb
Slide 28: Agenda
Agenda X Highlights 2003/2004 X Financial results X Business review X Industrial Business Segment X Food Service/Retail Business Segment X Performance targets X Proposals to the AGM X Summary for investors NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 28
Slide 29: Industrial Business Segment 2003/04: Another very successful year
Industrial Business Segment 2003/04: Another very successful year ... ... with both Cocoa and Food Manufacturers contributing to a strong EBIT and EBIT/tonne growth X Sales volume up 3.1% (like-for-like 5.4%) resulting from: X Food Manufacturers up 2.7% in – like for like 5.7% X Cocoa up strong 4.5%
Slide 30: Industrial Business Segment – key figures
Industrial Business Segment – key figures (in CHF m) Change in 2003/04 2002/03 Sales volume (in tonnes) 3,1% 650.621 631.146 Cocoa 4,5% 126.316 120.827 Food Manufacturers 2,7% 524.305 510.319 Sales revenue 0,4% 2'203,3 2'193,9 Cocoa -8,2% 564,0 614,2 Food Manufacturers 3,8% 1'639,3 1'579,7 EBITDA 15
Slide 31: Cocoa 2003/04 Substantial EBIT contribution
Cocoa 2003/04 Substantial EBIT contribution X Sales volume 126'316 tonnes 4.5% X Sales revenue CHF 564.0 million - 8.2% X Barry Callebaut processes approx. 15% of global cocoa harvest Approx. 3/4 of the products are for in-house use Remainder sold to the food industry X Sales volume increase:
Slide 32: Food Manufacturers 2003/04 Very successful year
Food Manufacturers 2003/04 Very successful year X Sales volume 524'305 tonnes + 2.7% X Sales revenue CHF 1'639.3 million + 3.8% X On a like-for-like basis sales volume up 5.7% compared to overall growth of world chocolate market of ~1% Fastest growth in France, Mediterranean countries, Eastern Eur
Slide 33: Agenda
Agenda X Highlights 2003/2004 X Financial results X Business review X Industrial Business Segment X Food Service/Retail Business Segment X Foundation for future growth & cost leadership X Performance targets X Proposals to the AGM X Summary for investors NOVEMBER 10, 2004 Annual Results Presentation
Slide 34: Food Service/Retail Business Segment 03/04
Food Service/Retail Business Segment 03/04: Positive EBIT contribution from both businesses... … strong organic growth in Gourmet & Specialties; moderate, hence positive contribution from Brach’s offset by unsatisfactory Consumer Products Europe X EBIT of CHF 99.3 m, down 2.6% X Sales revenue up 34%
Slide 35: Food Service / Retail Business – key figures
Food Service / Retail Business – key figures (in CHF m) Change in 2003/04 2002/03 Sales revenue 34,0% 1'845,6 1'377,4 Gourmet & Specialties 7,9% 514,0 476,4 Consumer Products 47,8% 1'331,6 901,0 EBITDA 6,0% 159,5 150,5 Operating profit (EBIT) -2,6% 99,3 102,0 Segment assets 22,8% 953,4 776,5 EBIT/Se
Slide 36: Gourmet & Specialties 2003/04: Substantial EBIT growth
Gourmet & Specialties 2003/04: Substantial EBIT growth X Sales revenue CHF 514.0 million + 7.9% X Sales volume 107,901 tonnes + 4.8% X Sales revenue increase of 7.9%, of which 3.8% organic growth Evidence that ready-to-use/ready-to-sell strategy is working Direct sales force in several countries
Slide 37: Consumer Products 2003/04: Action taken to achieve cost leadership
Consumer Products 2003/04: Action taken to achieve cost leadership X Sales revenue CHF 1,331.6 million +47.8% X Sales revenue increase of 47.8% X Acquisition of Brach’s (Sept. 2003) to create platform for building attractive consumer confectionery business in the U.S. restructuring and integration
Slide 38: The key to cost leadership - dedicated factories
The key to cost leadership - dedicated factories (new organization announced 10 Sept. 2004) Markets by geography & clients ... Food Manu- Artisanal Global facturers customers Retailers Marketing & Sales Cons. Cons. Cocoa FM G&S Europe America Operations & Supply Chain Plant 1 Plant 2 Plant 3 ... Pla
Slide 39: Achieving cost leadership - Consumer Products Europe
Achieving cost leadership - Consumer Products Europe X SKU reduction X Walk away from unprofitable volumes X Product transfer X Recipe optimization X Sales force restructuring X Streamlined brand portfolio X Brand transition NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentati
Slide 40: Rigorous SKU reduction in 2003/04
Example: Consumer Products Europe - Rigorous SKU reduction in 2003/04 3‘089 41 % re du ct 1‘085 io Stopped n 101 Transition (to be stopped) 75 1‘828 Under review Including Alprose and Jacques NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 40
Slide 41: Example: Product transfers - move to dedicated factories
Example: Product transfers - move to dedicated factories X Move to industrial plants Specialty chocolates (Sugar free, white) 1Q 05 Fat fillings 1Q 05 Nut pastes 1Q 05 X Move to consumer plants Liquid chocolate for German & Swiss customers Started Easymelt for Gourmet 2Q 05 1 kg blocs fo
Slide 42: Recipe optimization - no impact on quality & taste
Recipe optimization - provided no impact on quality & taste X Tablets (illustrative example) Addition of BB3 Different milk powder Total cost impact EUR 0.03 per kg X Dragees (illustrative example) Recipe optimization (same actions as above) Optimized chocolate cover Different raisins (T
Slide 43: Sales force restructuring
Sales force restructuring X Need to adapt sales force to changed retail landscape X Concentration of big retailers X Growing importance of discount channel X Bringing together the two sales forces of Gubor and Stollwerck X So far independent, leading to overlap X Reduction from approx. 200 to approx
Slide 44: Streamline the brand portfolio
Streamline the brand portfolio before after Europe US Europe US Premium Germany Germany Centre of R&D Middle Local brands Private PLB / own brands Customer Solutions NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 44
Slide 45: Building a strong brand under one umbrella
Building a strong brand under one umbrella ... t i on nsi 2005/06 T ra and ~ EUR 100 m B r 2003/04 • More visibility in shelf EUR 40 m • Higher significance for retail • Chocolate competence through wide range of products • Creating values through brand positioning & upgrading (new design, relaunch)
Slide 46: ... by transitioning successful concepts
... by transitioning sussessful concepts One strong brand umbrella NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 46
Slide 47: Agenda
Agenda X Highlights 2003/2004 X Financial results X Business review X Industrial Business Segment X Food Service/Retail Business Segment X Performance targets X Proposals to the AGM X Summary for investors NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 47
Slide 48: Performance targets through 2006/07
Performance targets through 2006/071) X Top line growth (organic) 3 - 5% on average – at least twice expected market growth X EBITA2) growth 8 – 10%3 X PAT 12 – 15% - fuelled by expected ongoing favorable tax situation as well as close management of financial costs 1) Our view for the 2004–2007 peri
Slide 49: Agenda
Agenda X Highlights 2003/2004 X Financial results X Business review X Industrial Business Segment X Food Service/Retail Business Segment X Performance targets X Proposals to the AGM X Summary for investors NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 49
Slide 50: Proposals to Annual General Meeting (December 8, 2004)
Proposals to Annual General Meeting (December 8, 2004) X Payout X Increased payout of CHF 7.80 per registered share proposed to AGM. Par-value reduction and repayment in lieu of dividend New par value CHF 92.20 instead of CHF 100.00 Net of withholding tax Pay-out free of charges in February 20
Slide 51: Agenda
Agenda X Highlights 2003/2004 X Financial results X Business review X Industrial Business Segment X Food Service/Retail Business Segment X Performance targets X Proposals to the AGM X Summary for investors NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 51
Slide 52: Summary
Summary Barry Callebaut is the only fully vertically integrated chocolate company from the bean to the shelf and the world market leader Cost leadership – differentiated services – innovation are the drivers for growing twice as fast as the markets We have a strong focus on quality and on innovation
Slide 53: Backup
Backup NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 53
Slide 54: Key figures - Income statement
Key figures - Income statement % of 2003/04 % of 2002/03 (in CHF m) revenue revenue Sales Revenue 100,0 4'048,9 100,0 3'571,3 Material consumed 63,4 (2'567,5) 68,1 (2'431,0) Gross Profit 36,6 1'481,4 31,9 1'140,3 Other operating expenses 30,9 (1'253,1) 26,1 (931,6) Operating Profit (EBIT) 5,6 228,3
Slide 55: Equity reconciliation
Equity reconciliation 2002/03 – 2003/04 (CHF m) Equity PY CY Profit Dividends Treasury Shares Translation adj CF hedges Equity Aug 04 759.2 115.6 -36.1 -16.8 -17.9 -3.0 800.9 NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 56
Slide 56: Tighter net working capital management and reduced liquidity risk
Tighter net working capital management and reduced liquidity risk X Further shift from short- to long term debt (EUR in CHF m 140m ) 1200 1'030 X Backup line 960 955 1000 914 943 increased 829 and 800 458 287 extended to 435 382 2008 384 600 817 X Reduced 400 656 bean stock 572 200 143 0 2001/02 200
Slide 57: Cocoa price development
Cocoa price development London cocoa terminal market 6-month forward price 1700 1600 1500 1400 1300 1200 (in £/tonne) 1100 1000 900 800 700 600 500 1/jan/98 1/jan/99 1/jan/00 1/jan/01 1/jan/02 1/jan/03 1/jan/04 1/nov/04 NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 58
Slide 58: Hazelnut price development
Hazelnut price development Turkish Hazelnut Kernels FAQ 670 570 USD/100 kg 470 370 270 170 11/07/96 11/07/97 11/07/98 11/07/99 11/07/00 11/07/01 11/07/02 11/07/03 11/07/04 prices ddu curr. crop new crop NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 59
Slide 59: Cocoa price development (backup)
Cocoa price development (backup) Dutch-German butter and powder outright prices, ex-factory Evolution from January 1997 to September 2003 4,50 4,50 4,00 4,00 Powder price 3,50 3,50 Butter price 3,00 3,00 (in euro / kg) (in euro / kg) 2,50 2,50 2,00 2,00 1,50 1,50 1,00 1,00 0,50 0,50 mei/97 mei/99 me
Slide 60: Market outlook (backup)
Market outlook (backup) World cocoa bean stock / Annual world cocoa bean grinding 60% 50% 40% 30% 20% 10% 0% 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 NOVEMBER 10, 2004 Annual Results Presentation 2003/04 – Analysts Presentation 61
Slide 61: Trading history – share price performance
Trading history – share price performance 120.00% BARN SW Equity 100.00% SPI Index SPISMC Index 80.00% BARN SW Equity SPI Index SPISMC Index 60.00% 40.00% 20.00% 0.00% -20.00% -40.00% Sep 02 Jan 03 Apr 03 Jul 03 Okt 03 Jan 04 Apr 04 Jul 04 Okt 04 NOVEMBER 10, 2004 Annual Results Presentation 2003/04
Slide 62: Trading history – share price performance and daily volume
Trading history – share price performance and daily volume Barry-Callebaut share price and volume Share price in % Volume 30'000 120.00% 100.00% 25'000 80.00% 20'000 60.00% 15'000 40.00% 20.00% 10'000 0.00% 5'000 -20.00% 0 -40.00% Sep 02 Oct 04 NOVEMBER 10, 2004 Annual Results Presentation 2003/04 –