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Callebaut Profit Beats Estimates on More Lucrative Contracts

  • Magnum chocolate maker phasing out lower-margin cocoa orders
  • Shares surge as Swiss company outperforms chocolate industry

Barry Callebaut AG, the low-profile maker of a quarter of the world’s chocolate, reported first-half earnings that beat estimates as it weeds out less profitable cocoa contracts.

Earnings before interest and taxes dropped 8.4 percent to 201 million Swiss francs ($210 million) in the six months through February, weighed down by the currency’s strength, the Zurich-based company said in a statement Wednesday. Analysts expected 191 million francs. The stock rose 8.6 percent as of 10:50 a.m. in Zurich, on track for the biggest gain in more than seven years.

“The measures in order to restore profitability in cocoa are bearing fruit,” Jean-Philippe Bertschy, an analyst at Bank Vontobel, wrote in a note.

The beat cheered investors as Barry Callebaut, which produces chocolate for major brands such as Cadbury and Hershey, has predicted a tough year. After El Nino, the weather pattern that threatens crops from Ecuador to Indonesia, there is a 50 percent chance that counter-cycle La Nina will move in this year, according to Bloomberg Intelligence analyst Duncan Fox. That pattern caused prices of agricultural products like sugar to rise the last time it occurred in mid-2010, increasing the cost to make chocolate.

“The year will remain challenging from a profitability point of view due to the current cocoa products market,” Chief Executive Officer Antoine de Saint-Affrique said in the statement.

Barry Callebaut, which supplies Unilever with chocolate for its Magnum ice cream, may make bolt-on acquisitions in specialties, chocolate decorations and gourmet, to add new markets or capabilities, the CEO told reporters. Last month, the chocolate maker completed the purchase of a cocoa-beverage vending unit of FrieslandCampina Kievit that has annual sales of about 55 million francs.

Volume rose 4.5 percent. Revenue climbed 12 percent in local currencies, reaching 3.42 billion francs and beating the 3.36 billion-franc analyst estimate.

The company reiterated its forecast for volume to grow 4 percent to 6 percent per year on average of the the three years through August 2018, with faster Ebit growth in local currencies. Barry Callebaut also said significant growth is expected in emerging markets for the next five years in chocolate.

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