Barry Callebaut Earnings: Stronger Gourmet Volumes Offset Weak Demand for Fast-Moving Consumer Goods

Barry Callebaut reported first-quarter fiscal 2024 results. Volumes were up 0.4% for the year, ahead of a challenging and overall, declining chocolate confectionery market (down 2.7%, according to Nielsen). Revenue in Swiss francs was up 6.2% at CHF 2.241 million. Performance in North America continues to be disappointing with weak trends in volumes continuing at down 4% versus down 6.6% for the underlying regional chocolate confectionery markets. On the contrary, performance in its Western Europe division and Central and Eastern Europe division was promising with volumes up 4.7% and 1.8% respectively, despite the declining regional chocolate confectionery market, but against the lower prior-year comparison base due to the Wieze, Belgium salmonella incident for the former. Sales volumes for both the Latin America and Asia, Middle East, and Africa divisions were down 1.3% and 1.5% respectively, broadly in line with underlying chocolate confectionery markets. All in all, although food manufacturers' sales volume was down 0.8% at the group level, gourmet and specialties' volume more than offset this weakness, growing by 9.1% against a soft comparison base in the prior year. Guidance for flat volume and EBIT for fiscal 2024 remains unchanged. The group 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. Although our current estimates are close to the high end of new long-term guidance of 5% average volume growth and 7% EBIT growth, we expect a higher profitability base as a result of efficiency gains and cost-cutting to offset our adjustments to more modest growth expectations in the midterm. This leaves our CHF 1,910 fair value estimate for Barry Callebaut largely intact. We maintain our wide moat rating for the stock.