ZURICH Swiss chocolate maker Lindt & Spruengli (LISP.S) expects like-for-like sales to increase by another 6 percent this year, at the lower end of its long-term target, in a sign that a shrinking overall market in the United States is making growth more difficult.
However, the company said on Tuesday it was counting on a gradual improvement in consumers' appetite for chocolate treats and easing raw material costs to help it meet its long-term goals of 6-8 percent organic sales growth over the coming years.
Global chocolate demand is down as consumers tend to prefer healthier snacks, but Lindt has so far bucked that trend by marketing its Easter bunnies and Lindor chocolate balls as high-quality treats customers can indulge in at special moments.
"We expect the environment in 2017 to be quite similar to 2016. All the challenges are still there," Dieter Weisskopf, who took over as chief executive in October, told reporters at the company's headquarters in Kilchberg near Zurich.
He said order levels for Easter looked healthy but a repositioning of the Russell Stover brand in the U.S. market that weighed on sales and margins last year was continuing and lower cocoa bean prices would have a positive impact only in 2018.
Lindt faced difficulties in 2016 due to high cocoa bean and butter prices, subdued consumer sentiment in its biggest markets and price-sensitive trade partners.
Net profit rose 10 percent to 420 million Swiss francs ($415.2 million) last year, affording a 10 percent rise in the dividend by 10 percent, in line with analysts' forecasts.
The operating margin improved by 0.2 percentage points to 14.4 percent, at the lower end of the group's long-term forecast.
"To us, it seems, Lindt really had to stretch in order to reach the 6 percent organic growth for 2016, potentially trading margin for growth," Baader Helvea analysts said in a note, recommending a "hold" on the stock.
They said Lindt's share price premium might no longer be justified if margin expansion started lagging more cost-focused peers.
The shares, which have risen almost 7 percent this year, were up 0.7 percent at 66,000 francs at 1137 GMT. They trade at 40 times forward earnings, at a premium to Nestle's (NESN.S) PE multiple of 27.3 and Hershey's (HSY.N) at 32.9.
Lindt said in January its underlying sales rose 6 percent in 2016, making it one of the fastest-growing food and beverage companies, ahead of Hershey at 0.8 percent, Mondelez's (MDLZ.O) chocolate division at 2 percent and Nestle's confectionery business at 1.8 percent.
($1 = 1.0116 Swiss francs)
(Editing by Greg Mahlich)