Street Calls of the Week
Investing.com -- Barry Callebaut AG (SIX:BARN) shares plunged more than 18% on Thursday, hitting their lowest level in over a decade, after the Swiss chocolate maker cut its sales outlook for the year. The company blamed “unprecedented volatility” in the cocoa market for the downgrade.
The world’s top cocoa processor now expects cocoa sales volumes to decline by a mid-single-digit percentage for the financial year ending in August, compared to a previously forecast low single-digit drop.
The group, a major supplier to food giants such as Nestlé, has been under pressure from extreme swings in cocoa prices. “Unprecedented volatility” in recent months has rattled the market, with cocoa futures in London falling to around £6,096 ($7,839.5) per metric ton from a high of £9,290 in January.
The price surge has been driven by climate-related challenges and long-term underinvestment in key producing regions in West Africa, which accounts for about 70% of global cocoa output.
Barry Callebaut reported first-half sales volumes of 1.08 million tonnes, a 4.7% drop from a year earlier and below analyst estimates. The company reaffirmed its target for a double-digit increase in recurring core earnings (EBIT) in constant currency, even though first-half EBIT fell 2.9% to 329.6 million Swiss francs ($386.0 million).
Despite reaffirming its full-year profit target, the company warned that its cost-cutting program will take longer to impact results.
The “disruptive environment” has pushed back by 12 months the expected benefits from its “BC Next (LON:NXT) Level” transformation plan. Barry Callebaut still aims to achieve 250 million francs in annual savings under the program.