Barry Callebaut reports sales for the first nine months of fiscal year 2007/08: Dynamic sales growth

Barry Callebaut continued to deliver dynamic sales growth in the first nine months of the current fiscal year as sales volumes rose to 872,993 tonnes, which corresponds to a growth rate of 10.0% – more than three times the growth rate of the global chocolate market. The implementation of the major outsourcing deals that were signed last year is on track. Sales volumes were also driven by new contracts with new and existing industrial and artisanal customers, in all regions. This additional business more than compensated for the impact of a shorter pre-Easter selling season due to an exceptionally early Easter in 2008. The resulting volume decline in March was followed by higher volumes in the subsequent months, leading to very strong volume growth in the third quarter. Sales revenue rose by 18.6% to CHF 3,608.6 million in the first nine months of fiscal year 2007/08. Revenues were positively affected by historically high raw material prices and negatively impacted by a weakening USD and GBP against the EUR and CHF. These unfavorable exchange rate developments have started to weigh on exports of Gourmet chocolate from continental Europe to the U.S., the UK and Asia. Therefore, Barry Callebaut is about to launch a locally produced Gourmet line in the U.S. and in Asia.

Outlook Patrick De Maeseneire, CEO of Barry Callebaut, said: “Barry Callebaut is in a phase of intensive geographic expansion, building a platform for profitable and above-average growth over the next five years. The focus on our regional organization is paying off and volumes will continue to significantly outpace the global chocolate market. The food industry faces increasing cost pressure from high raw materials and energy prices and inflation as well as economic uncertainties. In addition, exchange rates and interest rates remain unfavorable. In light of these challenges, we have intensified our efforts to improve efficiency and launched cost savings programs across the Group. With these measures in place we are confident that we will reach our four-year financial targets over the period 2007/08-2010/11, barring any major unforeseen events.”

Overview of sales performance by region in the first nine months of fiscal year 2007/08

Region Europe Region Europe achieved sales volume growth of 8.6% to 604,207 tonnes, driven by good demand from industrial and artisanal customers. Sales revenue in Region Europe rose by 19.8% to CHF 2,709.2 million, partly as a result of exchange rate effects and higher cocoa bean prices compared to the prior-year period.

Food Manufacturers benefited from additional outsourcing volumes with existing customers in Western Europe and new contracts in Eastern Europe. The factory in Dijon, France, has been expanded by a Center of Excellence and installations for the production of compound. The new factory in Russia is now fully operational. Volume growth in Gourmet & Specialties was good, especially in the traditional Gourmet markets. To further develop this strategic business, the direct sales force was strengthened and a Chocolate Academy was opened in Zundert, the Netherlands, as an additional training and marketing platform for artisanal customers. Sales revenue at Consumer Products Europe was lower due to the unusually short pre-Easter selling season, as mentioned earlier.

Region Americas Sales volumes in Region Americas increased by 17.6% to 211,708 tonnes. As a result sales revenue in the region grew to CHF 668.0 million, up 19.6%. At constant currencies, sales revenue increased 28.4%.

The substantial growth in the Food Manufacturers business unit came partly from the volumes delivered to Hershey under the existing long-term supply agreement but also from new customers, both large and mid-sized. The chocolate factory under construction in Mexico is well on track. First trial runs are expected to happen this summer. Production from the cocoa factory in Swedesboro, NJ, is currently being shifted to the new cocoa factory acquired from FPI in Eddystone, PA, in December 2007. This move is expected to be completed by the end of the calendar year 2008. The Gourmet & Specialties business unit also recorded significant growth despite unfavorable exchange rates as the strong EUR relative to the USD increased the cost of imported Gourmet products from Europe. In order to strengthen the relationship with artisanal customers, a new Chocolate Academy will be opened in Chicago in the fall of 2008. Both business units are now ideally positioned for accelerated growth in the fourth quarter of the fiscal year 2007/08 and onwards.

Region Asia & Rest of the World Sales volumes in Region Asia & Rest of the World were flat at 57,078 tonnes. Volumes were affected by the sale of the Ivorian consumer products subsidiary SN Chocodi SA in February 2008 and the Senegalese consumer products subsidiary Chocosen in February 2007. Excluding the African consumer business, sales volume growth was 8.0%. For Region Asia & Rest of the World sales revenue grew by 3.8% to CHF 231.4 million.

As additional production capacities are now available at the new chocolate factory in China, volumes at the Food Manufacturers business unit in Region Asia are growing exponentially. Volume growth will further accelerate in the fourth quarter. Preparations for the first chocolate deliveries to Morinaga in Japan, scheduled for early 2009, are underway. Gourmet & Specialties continued to experience high demand across all Gourmet brands. The integration of the recently acquired 60% participation in KLK Cocoa has been completed.

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