Morningstar

Barry Callebaut: Nine-Month Revenue in Line, but Volume Behind; November Strategic Update Is Key

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Securities In This Article
Barry Callebaut AG
(BARN)

Barry Callebaut BARN released its 2023 nine-month trading update. Volume was down 2.7%, slightly lower than company-compiled consensus (down 2.4%), due to weaker-than-expected demand across regions, with global cocoa surprising on the upside (up 1.6% versus 0.4% for consensus). Revenue in Swiss francs was broadly in line with expectations (up 3.6% versus 3.5% for company-compiled consensus). Performance in the Americas was particularly disappointing with weak trends in volumes continuing (down 4.6% versus down 0.9% for the chocolate confectionery market in the region) and the company calling out the soft market environment due to inflationary pressures in Mexico and gourmet and specialties in North America. Given this challenging market environment, and despite management’s commentary “to work toward flat volume growth for full-year 2023″ (having previously revised down fiscal 2023 volume growth guidance to flat/modest growth from around 8% implied previously), we expect to trim our fiscal 2023 volume growth numbers to slightly negative from 0.8% currently, but don’t expect to materially change our GBX 2,330 fair value estimate. The new CEO will provide a full strategic update with the publication of full-year results on Nov. 1. Barry Callebaut’s midterm guidance calls for an average 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, all broadly in line with our estimates (5% average volume growth and 7% EBIT growth, improving ROIC). Midterm guidance metrics are important drivers of our valuation, hence in case the strategic update results in a downgrade of midterm growth expectations, it would adversely affect our fair value estimate.

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*. 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 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.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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