Barry Callebaut Full Year Results 2012/13

Full Year Results 2012/13
Analysts Conference
Nov 7, 2013

Because we love chocolate…

Cautionary note
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,” “estimate,” “intend,” “may,” “will,” “expect,”
and “project” and similar expressions as they relate to the company. Forward-looking
statements involve certain risks and uncertainties because they relate to future events.

Actual results may vary materially from those targeted, expected or projected due to
several factors. The factors that may affect Barry Callebaut’s future financial results are
discussed in the Letter to Investors as well as in the Annual Report 2012/13. Such
factors are, among others, general economic conditions, foreign exchange fluctuations,
competitive product and pricing pressures as well as changes in tax regimes and
regulatory developments. The reader is cautioned to not unduly rely on these forwardlooking statements that are accurate only as of today, Nov 7, 2013. Barry Callebaut
does not undertake to publish any update or revision of any forward-looking
statements.

2

Agenda
Highlights 2012/13
Juergen Steinemann, CEO
Financial review
Victor Balli, CFO
Strategy update & Outlook
Q&A Session

Nov 7, 2013

FY 2012/13 Analysts presentation

3

Highlights FY 2012/13

Successful year in further implementing our growth
strategy
+8.7%
Stand-alone*

+4.4%1
Stand-alone*

+ 11.4%
Volume growth

-3.9%1
EBIT growth

Acquisition of
Cocoa Business
from Petra Foods

Significant
investments in
expansion of our
footprint

-4.9%1
Net Profit
from continuing
operations

Dividend
CHF 14.50
per share

1 in CHF
* excluding recent acquisition of Petra Foods’ cocoa business (transaction costs and operating result)

Nov 7, 2013


4

Highlights 2012/13

Important steps taken towards the strengthening of
our leadership in the industry

Acquisition of Cocoa Business from Petra Foods
Signing agreement

Financing in place and Closing

Dec 2012

First outsourcing
agreement in South
America

Oct 2012

Nov 7, 2013

June 2013

Acquisition of ASM
Foods in Sweden

Jan 2013


Cocoa Horizons
Implementation –
First Cocoa Center of
Excellence

July 2013

Opening of 2nd.
chocolate factory in
Mexico

Opening of cocoa
factory in Indonesia

June 2013

Sep 2013

Opening of 1st.
chocolate factory in
Turkey

Oct 2013

EU Commission
approves BC health
claim

Sep 2013

5

FY 2012/13

Strong broad-based volume performance
Sales Volume by Region

Volume growth vs prior year

Europe

AsiaPacific 4%
Global
Sourcing &
Cocoa
20%

+8.1%

Americas
Europe
48%

+16.7%

Global Sourcing & Cocoa

+14.5%

Americas
28%

Asia-Pacific

Underlying market

1

1

+1.8%

+1.6%

Source: Nielsen – Chocolate Confectionery volume growth of top 16 countries;September 2012 - August 2013
Note: Total volume includes recently acquired cocoa business

Nov 7, 2013


6

Five-year development

Continued focus on our key expansion drivers
Emerging Markets

Long-term outsourcing &
Strategic partnerships

+23% vs prior year

+28% vs prior year

CAGR +15%

CAGR +34%

26%
20%
2008/09

Nov 7, 2013


+10% vs prior year

2008/09

10%
10%

2012/13

Volume
growth

CAGR+9%

22%
10%

2012/13

Gourmet & Specialties

2008/09

of total
Group
volume

2012/13

7

Significant expansion of manufacturing footprint provides
diversification and unique competitive advantage

Cocoa processing factory
Chocolate factory
Integrated cocoa & chocolate factory
New Factory, under construction or
expansion
Nov 7, 2013


8

Gourmet & Specialties: strong top and bottom-line
performance
Group Gourmet & Specialties Business – Growth evolution

CAGR+9.0%

Sales
Volume
(tonnes)

-0.7%
2008/09

1.2%

2009/10

+9.9%

1.3%

0.6%

2010/11

2011/12

CAGR +11.5%

1.5%

Underlying
market growth*

2012/13

+17.7%

EBIT
(in constant
currencies)

* Source: Euromonitor Foodservice
Nov 7, 2013


9

Strongest ever activation plan for our global brands
with key focus behind growing the core…
The Callebaut® brand

100% Belgian, from bean to chocolate

N°1 chocolate brand for
professionals worldwide, at the heart
of great chocolate stories
First gourmet brand to switch
completely to sustainable cocoa
Gaining momentum in emerging
markets
Extending the core with new applications
« Callebaut Hot Chocolate Concept»
Building brand equity: «Callebaut
TV», First Chocolate App «Chocolizer»,
social media

Nov 7, 2013


10

Strongest ever activation plan for our global brands
supported by the world leading chefs…
The Cacao Barry® brand

unlocking the sensorial richness of cacao &
chocolate to inspire creativity

N°1 French brand for professionals
worldwide
Launch of Cacao Barry “Purity from
Nature” – the next generation
Chocolate
Renovate the core Cacao Barry France
Ensure availability of the premium core
range in key cities globally
Building brand equity: “Cacao Barry Live”,
50 Best Restaurants Official Sponsor, “World
Chocolate Masters”, Social media

Nov 7, 2013


11

Striving for cost leadership while growing at a high
pace...
Capacity
Utilization
• Chocolate: 95%
(target 82-85%)

• Cocoa 92 %

Manufacturing
costs per
tonne
-2.6%1

(target 90-95%)

Energy
consumption
-5%

Optimization
of materials
used

(5-year target -20%2)

Higher
supply chain
costs
due to
capacity
constraints

Production
capacity
expansion and
new factories

1) On like-for-like basis
2) Target -20% by 2013/14, accumulated -23% until 2012/13 ahead of target
Nov 7, 2013


12

“Cocoa Horizons”: Execution platform for sustainability projects

Our sustainability initiative in numbers

Increase sustainable cocoa supply
and improve farmer livelihoods

Farmer Practices

Farmer Education

Double yield & improve
quality

Train next farmer
generation

110,000 farmers trained

Built 3, and extended 5
primary schools

73 participating cooperatives
1 Cocoa Center of Excellence
5 regional Showcase Farms

Child labor awareness
raising with farmers and
teachers, distributed
school kits

Farmer Health
Clean water & basic
healthcare
Micro health insurance
program launched targeting
250,000 people
7 boreholes and water
systems built
Distributed mosquito nets

575 Farmer Field Schools

QPP Cooperatives + Biolands Cocoa Buying Programs

Nov 7, 2013


13

Strong innovation funnel with focus on fewer, bolder
and bigger projects

Project B

Project
A

B Asia

Project J

Project C
Project D

I
D
E
A
G
A
T
E

Project E

F Relauch
Project G

Project K

Project H

Project L

C
O
N
T
R
A
C
T

L
A
U
N
C
H
Project M

G
A
T
E

G
A
T
E

QPP + Pure
Terra Cacao

Acticoa
Sweet

Stevia
Sweet by fruit

Celebrate
(Decorations)

Project I

Nov 7, 2013


14

Project «Spring»: Enhancing our leadership in service
Workstreams

Customer
segmentation
Harmonized processes
for Quality Assurance

Customer Service

New Product
Introduction

Oct 17

May 8

2011

Pre-Spring:
Study

2012

Pricing

Dec 15

Process design
and organization

April

Implementation
system

June

2013

Go-live

Sept

Today
2013

Jun

2014

Roll Out

First positive results achieved. Change management and complete rollout key for a successful implementation
Investment of EUR 30 mio and annual savings of EUR 10 mio confirmed
Nov 7, 2013


15

Integration of the recently acquired cocoa business
from Petra Foods well on track...
Organization in place
Regional and global commercial and functional organization
Commercial model
Combined cocoa and chocolate sales forces, one face to the
customer approach
Global Supply Chain
Global manufacturing and supply chain network integration
started
Systems
Alignment and SAP implementation in design phase
Synergies
All synergies confirmed and implementation projects in place
Culture
Awareness of differences, act global stay local

Nov 7, 2013


16

Agenda
Highlights 2012/13
Financial review
Victor Balli, CFO
Q&A Session

Nov 7, 2013


17

Strong top-line growth, gaining profitability momentum
Group performance

FY 2012/13

% vs prior year

Sales Volume Total

1’535’662

+11.4%

Sales Volume stand-alone

1’498’632

+8.7%

EBIT Total

339.6

-3.9%

EBIT stand-alone

368.8

+4.4%

Net profit from continuing operations

229.3

-4.9%

Net profit for the year

222.6

+56.1%

EBIT per tonne

246.1

(in CHF)

-3.9%

Stand-alone: Excluding recent acquisition of Cocoa business of Petra Foods (2 months consolidated volume and operating result, one-off transaction costs)
Nov 7, 2013


18

Strong top-line growth, gaining profitability momentum

Europe

Volume
growth

Americas

+8.1%

+16.7%

Asia-Pacific

+1.8%

Global Sourcing & Cocoa

+14.5%1
+0.9%2

Market
volume
growth3
EBIT
growth
vs. prior
year
(in CHF)

+2.1%

+9.0%

-0.6%

+19.3%

1) Including acquisition of Petra Foods Cocoa Business

12.9%

-9.4%

-36.0%1
-17.6%2

2)excluding acquisition of Petra Foods Cocoa Business

3) Source: Nielsen data (Sep 2012- Aug 2013); - Top 16 countries represent approx. 75% of the global chocolate market in volume; - Americas includes USA and Brazil Eastern Europe
includes: Russia, Ukraine, Poland, Turkey; Asia includes China and India
Nov 7, 2013


19

Gross Profit –FY 12/13

Improved product margins fueled gross profit
in mCHF

* Without Cocoa
Processing impact
+9.6%

+13.4%

+74.1
+8.1

-25.1

+34.7

736.9

-27.5

728.5
-8.5

672.6

Gross Profit
FY 2011/12

Nov 7, 2013

Volume
effects

Product mix
and margin
effects

Cocoa
processing
impact


Additional
operational
costs from
business
growth

Scope effects,
non-recurring
items and FX

Gross Profit
stand-alone

Petra Foods Gross Profit
Cocoa
FY 2012/13
operational
Gross
Profit
20

Cocoa processing profitability

Combined ratio had a negative impact, however
current outlook is positive...
European combined ratio- 6 months forward ratio

FY 12/13

4.00

3.42
3.00

2.00

1.00

0.00
Oct-00

Oct-01

Oct-02

Oct-03

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Oct-12

Oct-13

For cocoa processors, profitability depends on the ratio between input costs (price of cocoa beans) and output prices (price of cocoa butter and powder).
Nov 7, 2013


21

EBIT bridge

Stand-alone operating result gained momentum +4.4%
in CHF m

* Without Cocoa
Processing impact
+11.5%
+4.4%
+64.3

-24.0

368.8
-24.7

353.2

-12.0

339.6
-17.2

EBIT
FY 2011/12

Nov 7, 2013

Additional
Gross Profit
(stand-alone
and FX)

Additional SG&A
from business
growth


Add. costs,
Scope and
FX effects
stand-alone

EBIT standalone

Petra Foods
Cocoa business
operational
EBIT result

Acquisition
costs related to
acquisition and
integration

EBIT
FY 2012/13

22

Foreseen profitability improvement of the recently
acquired cocoa business of Petra Foods
Good visibility of current portfolio
Recent improvement of combined ratio will positively impact 2014
Synergies confirmed
Integration of sourcing operations started
European business improvement initiated
Optimization of supply chain identified and in progress

Recently
acquired cocoa
business
EBIT
(CHF m)

30m

‐40m
2011

Nov 7, 2013

2012


H1
2013

13/14

14/15

15/16

23

Financial items

Net finance costs remained at prior year level, despite
recent financing for acquisition
in CHF m

Average
interest
rate

4.30%

4.36%

1.3

1.0%

69.1

Net interest
expense FY
2011/12
Nov 7, 2013

Net interest
expense FY
2012/13

7.2

69.8

-1.6

Bank charges,
Gain on derivative
fees and other
fin. Instruments
financial expenses
and FX


74.8
-1.9

Pension cost

Petra Foods cocoa
Net Finance
business acq. Net Costs FY 2012/13
expenses
24

Below EBIT

Continued good tax rate, last time effect from
consumer business divestiture
[CHF m]

Change in
%

FY 2012/13

FY 2011/12

CHF

Operating profit (EBIT)

-3.9%

339.6

353.2

Financial items

-0.1%

(74.8)

(74.9)

Profit before Taxes [CHF m]

-4.8%

264.8

278.3

4.6%

(35.5)
13.4%

(37.2)
13.4%

-4.9%

229.3

241.1

(6.7)

(98.5)

222.6

142.6

Income taxes
Tax rate [in %]
Net profit from continuing operations

1

Net result from discontinued operations
Net profit for the year

1

Nov 7, 2013

56.1%

Net profit from continuing operations (including minorities)


25

Cash Flow

Investments and strategic acquisition to support
future growth
in CHF m

+2.5%
440

451

-52

-224

+890

-106

32

-80

-847
Operating
Cash Flow*
FY 2011/12

Operating
Investment in
Capital
Cash Flow* Working Capital Expenditures
FY 2012/13

Interest paid
and income
taxes

Dividend
& Capital
reduction

CF from
Cash flow
Net increase in
acquisitions, from financing cash and cash
disposals, and
activities
equivalents
other

* Before Working Capital changes
Nov 7, 2013


26

Net Working Capital evolution

Continued good working capital management
in mCHF

Receivables

Stocks

Payables
+263

+4.3%

1’346

Petra Foods
Cocoa
business
Net Working
Capital

Net
Working
Capital
Aug 13

+103
+77
1’039

Net
Working
Capital
Aug 12

Nov 7, 2013

-41

-7

Growth
impact

Price impact
and
operational
improvements

Growth
impact


Price impact
and
operational
improvements

-44

Growth
impact

1’083
-32

-12

Price impact Others, scope
and
effects and FX
operational
(standalone)
improvements

Net
Working
Capital
standalone

27

Balance Sheet & key ratios

Stand-alone most ratios improved, total impacted by
recent acquisition
BC stand-alone
Aug 2013

Total Assets [CHF m]
Net Working Capital [CHF m]

Aug 12

4'527.1

Shareholders' Equity [CHF m]

1'345.7

1'039.2
1'424.8

1'525.2

942.9

1'762.3

993.1

3'576.6

2'072.1

1'083.4

Non-Current Assets [CHF m]
Net Debt [CHF m]

Aug 13

1'357.1

Debt/Equity ratio

65.4%

86.5%

69.5%

Solvency ratio

42.2%

38.9%

37.9%

2.2x

3.5x

2.2x

5.8x

5.8x

Net debt / EBITDA
Interest cover ratio
ROIC

10.5%

14.2%

ROE

Nov 7, 2013

13.3%
17.8%

14.7%

18.7%


28

Dividend

Payout ratio increased to 35%, total payout maintained
Total payout to shareholders

Proposed dividend
CHF 14.50 per share1

in CHF m

CAGR +5%

Payout of 35 % of Net Profit
Not subject to withholding tax2
65

72

80

80

80

2010/11

2011/12

2012/13*

Timetable for dividend
Shareholder approval: Dec 11,
2013 (AGM)
Expected ex-date: Feb 26, 2014
Expected payment date: March 3,
2014

2008/09
Payout
ratio

28%

2009/10

29%

31%

33%

35%

* As proposed by the Board to our Shareholders
1) From reserves from capital contributions
2) For individuals who are taxed in Switzerland and hold the shares privately also no income tax
Nov 7, 2013


29

Agenda
Highlights 2012/13
Financial review
Victor Balli, CFO
Q&A Session

Nov 7, 2013


30

Our strategy remains unchanged

“Heart and engine of the chocolate and cocoa industry”

Vision

Expansion

Innovation
Sustainable,
profitable
growth

Strategic
pillars
Cost leadership

Sustainable Cocoa

Nov 7, 2013


31

Further expansion of our chocolate and cocoa business

Demand outlook in chocolate and cocoa remains strong
Chocolate Confectionery – Volume in tonnes

1

2

24

280

Western Europe

240

200

Absolute
growth
(Tonnes)
2013-18

Cocoa powder– Volume in tonnes

Asia Pacific

160

Eastern Europe

120

Latin America
Australasia

80

South America

20

16
Absolute
growth
(Tonnes)
2011-16)

EU

12

8
6

40

North America

4

North America
0

Asia-Pacific

Middle East and Africa
0

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
Annual average growth 2013-18
Bubble size
indicates total
volume in
tonnes -2013

1)
2)

Nov 7, 2013

Volume growth
above average

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Annual average growth 2011-16
Bubble size
indicates total
volume in
tonnes -2013

Source: Euromonitor 2013
Customer interviews, Sunflower project market size, Euromonitor


32

Expansion

Taking global leadership in chocolate and cocoa

Cocoa Grinding Capacity

Industrial chocolate – Open market

Barry Callebaut

Barry Callebaut

Cargill

Cargill

ADM

Blommer

Blommer

ADM

Mondelez

Cemoi

Guan Chong

Puratos

Nestlé

Fuji Oil

Ferrero
IRCA
BT Cocoa
Guittard

Ecom Cocoa

Other players

others

Volume (MT)

Sales Volume (MT)

Source: Third-Party Study – 2013, Company estimates
Nov 7, 2013


33

Our ambition: preferred, proactive cocoa powder
supplier
Move from

Move to

Tactical player

Proactive seller of cocoa products

Strong sourcing base in West
Africa

More globally balanced sourcing
from origin countries, including
Asia and South America

Limited presence in emerging
markets

Greatly expanded presence in
emerging markets – Asia and
Latin America

Limited product offering

Comprehensive product offering

Nov 7, 2013


34

Strategy

Our key focus areas for 2013/14
Integrate Petra Foods cocoa business and
strengthen our position in cocoa powder
Enhance profitability
Continue product margin improvement
Keep supply chain and fixed costs under
control
Full implementation of Project Spring
Accelerate talent management programs
and succession planning
Strengthen leadership in sustainable cocoa

Nov 7, 2013


35

Outlook & Guidance

Our outlook for the next year and mid-term guidance
Market /
Industry

Long-term growth remains intact: around 2% volume
growth
Sensitive economic environment in Southern European
markets
Slower growth in some emerging markets, including FX
risks
Improvement of combined cocoa ratio

Guidance
Volume growth: 6-8% on average per year until 2015/16
EBIT/tonne restored to Barry Callebaut’s pre-acquisition
level by 2015/16*

* As of consolidation of the cocoa business acquired from Petra Foods: EBIT per tonne CHF 256 – barring any major unforeseen events
Nov 7, 2013


36

Agenda
Highlights 2012/13
Financial review
Victor Balli, CFO
Q&A Session

Nov 7, 2013


37

Summary
Significant top-line growth, profitability
gained momentum
Volume growth +8.7% stand-alone (+11.4%
total)
EBIT growth +4.4% stand-alone, (-3.9%
total)
Net profit CHF 229.3 mio (-4.9)

Growth driven by strategic partnerships,
Gourmet and emerging markets
Integration of the acquired cocoa business in
progress and synergy potential confirmed
Mid-term financial targets confirmed
Proposed payout of CHF 14.50 per share

Nov 7, 2013


38

Thank you

Nov 7, 2013


39

Appendix

Nov 7, 2013


40

Market Development

Overall chocolate confectionery market grew 1.6% in
volume vs. prior year
Global
+ 1.6%

WE
+1.7%

EE
+2.8%

USA
-0.9%
China & India
+12.9%

Brazil
+1.2%

1) Source: Nielsen data (Sep 2012- Aug 2013); - Top 16 countries represent app. 75% of the global chocolate market in volume; - USA total volumes are estimated based on a share
distribution by Euromonitor; Eastern Europe includes: Russia, Ukraine, Poland, Turkey.
Nov 7, 2013


41

Raw materials development
Historical evolution

% of total BC raw material costs
FY 12/13

300%

Cocoa beans

250%
55%
Cocoa beans

200%

Milk powder

150%

Sugar EU
Sugar world

100%

14%

Sugar

12%

Milk Powder

7%
12%

50%

Okt 06

Okt 07

Okt 08

Okt 09

Okt 10

Okt 11

Okt 12

Fats
Others

Okt 13

Note:
All figures are indexed to Aug 2006.
Source: Cocoa beans Ldn 2nd position; Sugar world London n°5 (2nd position), Sugar EU Kingsman estimates W-Europe DDP, skimmed milk powder average price Germany, Netherlands,
France.

Nov 7, 2013


42

West Africa is the world’s largest cocoa producer – BC
sources locally
Total world harvest (12/13): 3’986 TMT

Ecuador
5%

others
10%

BC stand-alone processed
~620,000 tonnes or 16 % of the
world crop

Brazil*
5%

Ivory
Coast*
37%

Cameroon
*
6%
Nigeria
6%

BC (including recently acquired
cocoa business) processed
~920,000 tonnes or 23 % of the
world crop
65% sourced directly from
farmers, cooperatives & local
trade houses

Indonesia
*
11%

Ghana*
21%

Source: ICCO estimates

Nov 7, 2013

About 70% of total cocoa beans
come from West Africa


Barry Callebaut has various cocoa
processing facilities in origin
countries*, in Europe and in the
USA

43

Expansion

3 mio tonnes of outsourcing potential for future growth
Global Industrial Chocolate market in 2012/13= 6,250,000 tonnes*
Integrated market

Open market

Big 4
chocolate
confectionary
players

Competitors
Others

Others

40%

49%

20%

51%

* Company estimates

Nov 7, 2013


44

Some of our key customers & long-term strategic partners

Nov 7, 2013


45

Capex investments support the growth of our business
in CHFm
+5.2%

+4.4%
+3.0%

+2.8%

+4.5%

CAPEX as % of sales revenue

+3.3%

Average = 4.0%

250
218

224
200

174
144

145

Additional growth
IT
Upgrade / efficiency gains
existing sites
Maintenance

2007/08

Nov 7, 2013

2008/09

2009/10


2010/11

2011/12

2012/13

2013/14
PLAN

46

Cash flow evolution

Strong operating cashflow despite fast volume growth
and expansion

CAGR 13.2%
407

434

458

480

418

Negative FX impact

455

451

2012

2013

348
313
228

252

116

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

* Operating Cash Flow before working capital changes

Nov 7, 2013


47

Stable financing offering enough headroom for
future growth and average maturity of 6 years
Financing and liquidity situation as of August 31, 2013
in CHFm

2,945
CHF 570 mio
Short term

Various
uncommitted
facilities

40.4%

EUR 400 mio
Commercial
Paper
Programme

Maturity 2016

Maturity 2023

Maturity 2021

Maturity 2017

Various bilateral LT loans

1,756

EUR 600 mio

3-5 years

ABS

Syndicated
bank loan
(12 banks)

USD 400 mio
5.5%
Senior Notes

EUR 250 mio
5.375%
Senior Notes

Long-term

EUR 350 mio

6% Senior Notes

Available Funding Sources
Nov 7, 2013

Short-term


Outstanding amounts
48

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