* First-half net profit 116 mln Sfr vs 129 mln Sfr in poll
* Sales volume grows 7.8 pct to 745,256 tonnes
* Cocoa bean prices seen stable to slightly lower-CFO
* Confirms mid-term financial targets
* Shares down 1.9 pct, underperform sector
(Adds CEO, CFO comments, analyst comment, background)
By Silke Koltrowitz
ZURICH, April 8 Swiss chocolate and cocoa
product maker Barry Callebaut reported a 7.4 percent
fall in half-year net profit on Monday, due to adverse moves in
cocoa prices as well as costs related to the purchase of Petra
Foods cocoa business last year.
The Swiss company, which makes chocolate and chocolate
products for big food companies such as Nestle, spent
$950 million in December on the cocoa liquor, butter and powder
business of Singapore group Petra to step up expansion
into high-growth emerging markets.
The acquisition will be financed by a $300 million capital
increase and $600 million bond, which already cost Barry
Callebaut its investment grade credit rating.
Chief Executive Juergen Steinemann said initial expenses
related to the acquisition had weighed on profits. He said
completion of the deal and integration were well on track.
Steinemann said half-year results were also hit by an
unfavourable combined cocoa ratio, which meant prices for the
group's cocoa ingredients like cocoa butter and powder fell more
than prices for cocoa beans.
But this trend should reverse in the second half.
Chief Financial Officer Victor Balli said the combined cocoa
ratio had gone up a lot due to higher prices for cocoa butter.
"Chocolate demand went up and prices followed, that will help us
in the second half."
Balli also said the cocoa bean crop outlook was relatively
good. "We expect prices to stay stable or to fall slightly."
The prospect of a large West African April-September cocoa
crop plus a lag in forward sales from Ivory Coast and Ghana
pushed cocoa prices to an 11-month low in March.
Barry Callebaut, the world's biggest maker of finished
chocolate products, has been benefiting from a trend towards
outsourcing chocolate production. This helped the group to
outgrow the market in its first half, with sales volumes rising
7.8 percent in a chocolate market that grew only 1.5 percent.
The company is working on new outsourcing deals.
"Asia is definitely the market with the biggest potential
for us: we want to be in India and also grow our business in
China, Turkey and Russia," Balli told Reuters. He said emerging
markets consumed a lot of cocoa powder so that this market was
actually growing faster than the chocolate market, at about 2-5
Balli said the group, which is controlled by the Jacobs
family, hoped to regain its investment grade credit rating in
about three years.
Net profit in the half-year to February fell to 116.4
million Swiss francs ($124.7 million), below a forecast of 129
million francs in a Reuters poll.
But sales volumes grew 5.8 percent in Europe, the group's
largest market, despite the "challenging" market environment in
southern Europe. Chocolate sales have been holding up because
people are reluctant to give up their favourite chocolate treats
even if money is tight.
Hershey, also one of Barry Callebaut's customers,
last month forecast sales to grow 5-7 percent this year, while
Swiss peer Lindt aims to increase underlying sales by
"BC (Barry Callebaut) convinces once more with high volume
growth," Sarasin analyst Patrick Hasenboehler said in a note.
"However, BC was not able to transfer this top-line growth into
the bottom-line results." He also said the planned capital
increase was also likely to be a drag on the shares.
Barry Callebaut shares were down 1.9 percent at 895.5 francs
by 0705 GMT, compared to a 0.4 percent firmer European food and
($1 = 0.9332 Swiss francs)
(Reporting by Emma Thomasson. Additional reporting by Sarah
McFarlane in London. Editing by Jane Merriman)