Barry Callebaut Earnings: Full-Year Results Ahead With a Sweet Taste From the New Restructuring Plan

Barry Callebaut unveiled its turnaround plan along with fourth-quarter and fiscal 2023 results. Volumes were down 1.1% for the year, with trends in the fourth quarter turning positive (up 3.9%) partially due to an easy comparison base (volumes were down 2.4% in the fourth quarter last year). Revenue in Swiss francs was up 4.7% at CHF 8.470 billion versus CHF 8.370 billion in our model (up 9.7% in local currencies) driven by better-than-expected volumes (down 1.1% versus down 2.1% in our model). Performance in the Americas and Asia-Pacific continue to be disappointing with weak trends in volumes continuing (down 4.6% versus down 3.5% in our model in the Americas and down 2% versus down 1% in our model for Asia-Pacific). On the contrary, performance in Europe reversed in the second half, with volumes slightly down for the year (negative 0.4% versus our expectation of negative 3%). Operating profit came in higher at CHF 659 million versus CHF 641 million in our model. The new CEO provided a full strategic update with the publication of full-year results as previously announced. Within this, the group now expects long-term volume growth from fiscal 2026 onward of low single digits to midsingle digits and EBIT growth of midsingle digits to high single digits. This compares with Barry Callebaut's previous midterm guidance of an average of 4%-6% in volume growth and 8%-10% EBIT growth in local currencies with a further improvement in return on invested capital over the following three-year period to fiscal 2026. Although our current estimates are close to the high end of new long-term guidance (5% average volume growth and 7% EBIT growth, improving ROIC), we expect the higher profitability base (the result of efficiency gains and cost cuts) to offset our adjustments to more modest growth expectations in the midterm, leaving our CHF 1,910 fair value estimate for Barry Callebaut largely intact.