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Barry Callebaut Changes CEO; Higher Profit, Lower Volume in H1

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Securities In This Article
Barry Callebaut AG
(BARN)

Barry Callebaut BARN released its first-half 2023 results. Volume was down 2.9%, slightly lower than company-compiled consensus (down 2.2%), due to weaker-than-expected demand in Asia-Pacific and Americas. Performance in region Americas was particularly disappointing with sequential deterioration in volumes (down 2.4% in the first quarter and down 6.6% in the second versus improving trends across other segments) and the company calling out the soft market environment that led customers to prioritize destocking and continue to delay orders in the second quarter. On the flip side, profitability surprised on the upside (EBIT at CHF 348 million and EBITDA at CHF 467 million versus CHF 322 million and CHF 447 million for consensus, respectively), which was primarily driven by better mix and the global cocoa segment (tailwind from a better cocoa combined ratio). Given this challenging market environment, management lowered its fiscal 2023 volume growth guidance to flat/modest growth (from around 8% implied previously) with continued strong operating profitability. Consequently, the company now expects to achieve average volume growth of below 5% and thus won’t achieve its top-line midterm guidance (5%-7% volume growth over the fiscal 2021-23 period). Barry Callebaut confirmed midterm guidance for the following three-year period to fiscal 2026 for an average 4%-6% in volume growth and 8%-10% EBIT growth in local currencies with further improvement in return on invested capital all broadly in line with our estimates (5% average volume growth and 7% EBIT growth, improving ROIC). We don’t expect to materially change our CHF 2,400 fair value estimate as we update our model to account for weaker volume guidance. With the shares trading in 5-star territory, we think Barry Callebaut makes a compelling investment case for defensive long-term-oriented investors, and we would advice investors to take advantage of any weakness in the share price.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
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Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar, where he covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through significant projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

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