April 16 (Reuters) - Barry Callebaut sold less of its cocoa products in the first half of its financial year, citing weak demand and market overcapacity, but raised its full-year volume outlook in a
Barry Callebaut slashes profit view on cocoa overcapacity, supply troubles
Barry Callebaut Cuts Profit Forecast Amid Market and Supply Chain Challenges
By Anastasiia Kozlova and Danny Callaghan
April 16 (Reuters) - Swiss chocolate maker Barry Callebaut cut its operating profit forecast on Thursday, citing supply chain disruptions linked to the Iran war and overcapacity in the cocoa market, sending its shares 12% lower in early trading.
Sales Volume Outlook and Earnings Pressure
While the Zurich-based group expects sales volumes to rebound in the second half of the financial year through August 31, it warned earnings would remain under pressure for longer.
Revised Earnings Forecast
Barry Callebaut, which supplies chocolate for Magnum ice creams and Nestle's KitKat bars, now expects its recurring earnings before interest and taxes to fall by a mid-teens percentage in local currencies this year, having previously forecast low- to mid-single-digit growth.
Its recurring half-year EBIT fell 4.2% in local currencies to 310.9 million Swiss francs ($398.0 million).
CEO Statement on Market Conditions
"The unique speed of the market decrease combined with a competitive overcapacity market, volume declines and supply disruption impacted EBIT performance and adjusted our profitability outlook for the year," the group's new CEO Hein Schumacher said in a statement.
Supply Chain Disruptions and Factory Closures
Supply was also affected by a temporary factory closure in Canada in the first quarter of the year.
Analyst Reactions and Future Projections
Analysts from J.P. Morgan said in a note they expected the outlook cut to cause a roughly 20% decrease in consensus earnings forecasts for fiscal 2025/26.
Global Cocoa Market Dynamics
Weak demand and ample cocoa harvests have set a record bean surplus, much of which is located in West Africa, where Ghana and Ivory Coast produce nearly 50% of the global cocoa output.
Cocoa futures, which Barry uses to lock in cocoa purchase prices and hedge against fluctuations, have meanwhile plunged from their 2024 peak.
Sales Volume and Future Expectations
The Swiss cocoa processor said its sales volume fell 6.9% from a year ago to 1.01 million metric tons between September and February, in line with market expectations according to a company-provided poll.
With a return to growth on the horizon, it now expects a smaller volume decline of between 1% and 3% for the full year. It had previously guided for a mid-single-digit percentage drop, with analysts modelling a 4.6% decline.
Additional Information
($1 = 0.7812 Swiss francs)
(Reporting by Anastasiia Kozlova and Danny Callaghan in Gdansk; editing by Milla Nissi-Prussak)
