Investing.com — Barry Callebaut (SIX:BARN) reported lower sales volume in the first quarter of their 2025 fiscal year, as expected by the market
Shares of chocolate and cocoa products maker were down 4.1% at 04:09 ET (09:09 GMT).
Barry Callebaut’s actual sales volume decline of 2.7% exceeded the market’s expected decline of 2.2%.
This drop was particularly sharp in Western Europe, where volumes fell by 7.5%. The region faced tough comparisons from a large one-off contract from the previous year, as well as impacts from customer delistings at retailers.
Barry Callebaut has suggested that, excluding the one-off contract, the Western European decline would have been closer to the market’s overall drop of 1.5%.
However, growth in Latin America and Asia-Pacific exceeded expectations, with volumes increasing by 13.2% and 6.4%, respectively.
North America, which saw a 1.9% volume decline, also performed slightly better than expected.
Despite the volume setback, the company reported a 15% increase in CHF Q1 revenue, which was 20% ahead of consensus forecasts, driven primarily by stronger pricing.
The company’s revenue growth was supported by a rise in cocoa prices, which were up by 70% since the prior fiscal year.
Analysts at Barclays (LON:BARC) noted that the company’s performance seemed to reflect this cocoa price surge, with the company’s strong pricing actions offsetting some of the volume pressures.
For the full year, Barry Callebaut has lowered its volume guidance for fiscal 2025, now forecasting a low-single-digit volume decline, a downgrade from its previous forecast of flat volumes.
This change aligns with the expectation of continued cocoa price inflation and the ongoing challenges in the Western European market.
Despite this reduction in volume expectations, Barry Callebaut has maintained its guidance for double-digit EBIT growth in constant currency terms, citing the success of its pricing strategy and cost savings from its ” Next (LON:NXT) Level” program.
“We think this should be anticipated however given Cocoa bean prices are up >70% in 1Q25. For the 2024/25 cocoa bean harvest season, the group notes good arrivals of beans in line with expectations,” said analysts at Morgan Stanley (NYSE:MS) in a note.
The company has also reiterated that its cost-savings initiative is progressing as planned, helping to cushion the impact of rising input costs.
Regarding cocoa supply, Barry Callebaut has noted that it expects a small global surplus for the 2024/2025 season, with overall supply expected to be higher than in the previous season, though still below the 2022/2023 levels.
While concerns over the outlook for the West African mid-crop have driven recent increases in cocoa prices, Barry Callebaut remains confident in its ability to secure enough beans to meet demand, given its position as a market leader.
In light of the higher cocoa price environment, Barry Callebaut is also exploring additional pricing strategies to ensure adequate returns on its capital investments.
The company’s recent CHF 300 million bond issuance, which was priced at low coupon rates, is expected to help alleviate some concerns over its balance sheet.
However, analysts at Barclays believe that free cash flow inflection may be delayed due to the ongoing inflation in cocoa prices.
