Barry Callebaut
CAGE – Consumer Analyst Group Europe
London, March 19th 2012 Barry Callebaut at a glance
FY 2010/11 X World leader in high-quality cocoa Sales volume =1,296,438 tonnes and chocolate products and outsourcing/ strategic partner of Asia- choice Pacific
Global 4% X World’s largest supplier of Gourmet Sourcing & Cocoa & Specialties chocolate for artisanal 20% customers Europe 51% X 6,000 people worldwide, around 40 production facilities
X Fully integrated with a strong position in cocoa-origin countries Americas 25% X Close to 2,000 recipes to cater for a broad range of individual customer needs Sales revenue = CHF 4,554 m X We serve the entire food industry, from EBIT = CHF 360.6 m industrial food manufacturers to Net Profit *= CHF 258.9 m artisans and professional users
* From continuing operations
March 2012 Barry Callebaut – CAGE Conference London 2 Barry Callebaut is present in all stages of the industrial chocolate value chain
Cocoa Cocoa beans Plantations
80%
Cocoa liquor
~54% ~46%
Cocoa powder Cocoa butter
Barry Callebaut + Sugar, Milk, + Sugar, Milk, + Sugar, Milk, core activity others fats, others others
Powder mixes Compound/Fillings Chocolate couverture
Customers: Food Manufactures, artisans and professional users of chocolate
March 2012 Barry Callebaut – CAGE Conference London 3 Expansion BC market leader in the open market
Global Industrial Chocolate market in 2010/11 = 6,000,000 tonnes*
Open market Integrated market
Competitors Big 4 chocolate Others confectionary Others 22% players 40% 20% 40% 2% 3% 49% 51%
8% 80%
11% 14%
*BC estimates
March 2012 Barry Callebaut – CAGE Conference London 4 Robust business model
Barry Callebaut business model
100g chocolate tablet contains: Price List r Cocoa Products Gourmet at market price Cocoa butterbusiness 11% 9% Milk powder Cocoa Products Sugar on cost plus Other 11%
Food Manufacturers 69%
80% Cost Plus
X Raw materials represent about 80% of operating costs
Cost Plus model – pass-on the cost of raw materials to customers
March 2012 Barry Callebaut – CAGE Conference London 5 Our Strategy
Vision “Heart and engine of the chocolate industry”
Expansion
Innovation Strategic Sustainable, pillars profitable growth Cost leadership
New Sustainable Cocoa
March 2012 Barry Callebaut – CAGE Conference London 6 Expansion “Expansion” in its three dimensions
• Drive consolidation and grow profitably in mature markets Geography • Achieve full potential in recently entered emerging markets • Further expand in new emerging markets
• Strengthen our current partnerships Outsourcing … • Implement recently signed contracts… & Strategic Partnerships • New outsourcing deals with local and regional players
Gourmet & • Accelerate growth of Gourmet & Specialties Specialties Products business Products
March 2012 Barry Callebaut – CAGE Conference London 7 Expansion Our global footprint- around 40 factories in 4 continents
Chekhov, Russia Thimister, Belgium
Lebbeke-Wieze, Belgium Heule-Kortrijk, Belgium Nuth, The Netherlands Zundert, The Netherlands Banbury, UK St. Albans, VT, US St Helens, UK Kagerod, Sweden Chester, UK Pennsauken, NJ, US St. Hyacinthe, Canada Lodz, Poland Eddystone, PA, US Louviers, France Robinson, IL, US Meulan, France Dijon, France American Canyon, CA, US Dübendorf, Switzerland Monterrey, Mexico North Carolina, US Norderstedt, Germany Tsukaguchi, Japan Abidjan Zone, Verbania-Intra, Italy Reus, Spain San Sisto, Italy Ivory Coast Suzhou, China Vic Gurb, Spain San Pedro, Tarragona, Spain Ivory Coast Alicante, Spain
Port Klang, Malaysia Douala I, Cameroon Singapore, Singapore Tema, Ghana Toluca, Mexico
Ilhéus, Bahia, Brazil
Extrema, Minas Gerais, Brazil
Cocoa processing factory Chocolate factory Integrated cocoa & chocolate factory
March 2012 Barry Callebaut – CAGE Conference London 8 Emerging markets: Asia-Pacific strategy Expansion Ambition to grow faster than the market, while maintaining profitability
Key Facts Key priorities
Japan Grow the export markets from SEA factories
China 1 (Malaysia and Singapore) Myanmar Laos India ThailandVietnam Philippines Cambodia Brunei Malaysia Indonesia Singapore
Australia Double the size of the business in China 2 Develop locally adapted compound line X 4 billion people (60% of world’s population) Gain a foothold in India, further develop X Total market in Asia-Pacific of 3 imported and local gourmet activities approx. 1 mio tonnes
X Average annual growth of 6% Grow the business with imported Gourmet for the total Region 4 brands
X 30% of the market is open; 30% of the market is chocolate Gain additional outsourcing or supply 5 agreements in next 5-7 years; main focus on X 4% of BC Group volume India, Australia, Malaysia and China
X Strong differences amongst Selectively grow interesting customers in markets 6 Japanese business
March 2012 Barry Callebaut – CAGE Conference London 9 Expansion Outsourcing and Strategic Partner of choice
2006-07
Nestlé Cadbury Hershey Morinaga (February 2007) Schweppes (April 2007) (September 2007) (June 2007)
2010-11
Kraft Foods Green Mountain Hershey Extension Chocolates Turín Baronie Group (September 2010) Coffee Roasters (May 2011) (June 2011) (July 2011) (Oct 2010)
2011-12
Bimbo Unilever (Jan 2012) (Jan 2012)
March 2012 Barry Callebaut – CAGE Conference London 10 Expansion Gourmet 6 actions to accelerate Gourmet growth
Gourmet global market and BC presence
Total= >CHF 3bn
Chocolate products Adjacent products CHF ~2bn sales CHF >1bn sales 100%
80
>25 Adjacent> 100 60 >10 products: competitors competitors competitors Nut based 40 fillings, > 30 competitors > 20 competitors decorations, 24% BC global MS frozen pastry 20 BC
WE EE Americas Asia Worldwide
BC Market share >30% >10% >15% >15% <5%
1. Sharpen focus on global brands 2. Independent but Interdependent 3. From product to segment focus 4. Growth through acquisitions 5. Accelerate geographical expansion 6. Increase adjacent product offering
March 2012 Barry Callebaut – CAGE Conference London 11 Expansion Focus on the growing emerging markets as well as on long-term agreements/partnerships
% of total consolidated sales volume
Emerging 23% markets CAGR +19.3% 22%
16% 20% Long-term CAGR +78.8% 15% 11% 16% agreements / 7% 10% Partnerships 2%
Mature CAGR +0.8% markets
83% 77% 70% 67% 61%
2006-07 2007-08 2008-09 2009-10 2010-11
Note: For comparison reasons, all figures exclude Consumer business
March 2012 Barry Callebaut – CAGE Conference London 12 Innovation Innovation 72% of sales volume with new products developed in past 5 years
X R&D
X Pro-active innovation: new product development, fundamental research on cocoa/chocolate, clinical studies, farmer productivity & quality
X Applied R&D: renovate products/recipes, apply new technologies to finished products
X Performance in 2010/11
X 1,918 projects started, up 16% vs prior year
X Success rate of 50% (+10%)
X Successful at premium specialties: Terra Cacao™, certified products, nut fillings
X Deep new product funnel: 83 new products under development
X Request for approval of a health claim for products high in cocoa flavanols
March 2012 Barry Callebaut – CAGE Conference London 13 Cost Leadership Cost Leadership Supporting growth while staying cost leader
Cost per tonne evolution
108% 105%
100% 98%
92%
2006/07 2007/08 2008/09 2009/10 2010/11
Capacity Utilization X Continuous improvement: One+ Results: 4 pilot sites yearly savings ~CHF 7 million 92% 91% 86%
X Flow and footprint optimization (capacity utilization) 94% 88% 91% 90% 85% X Process and technology development 82% 94% X Raw material optimization Projects in Americas and Europe = annual savings > CHF 14 million 79% 83% 85% 89% 81% X Energy savings & CO2 reduction Results at end of year two: -11.8% energy consumption per tonne
2006/07 2007/08 2008/09 2009/10 2010/11 Costs per tonne -Target: -2% Cocoa grinding Liquid chocolate Cocoa pressing March 2012 Barry Callebaut – CAGE Conference London 14 SustainableSustainable Cocoa Cocoa Sustainable Cocoa We need more, sustainable cocoa in the future
X Consumption outpaces bean production X Competitive crops more profitable
Excess return of Rubber vs. Cocoa farming in Ivory Coast per Ha 4'000
3'800 World crop (net)
3'600 2'200 World grindings 3'400 1'600 3'200 Rubber more
3'000 profitable 1'000
2'800
2'600 400
2'400 €/ha -200 2'200 Cocoa more profitable
2'000 The industry will need -800 Production - Grindings1'800 (thds MT) 1 Mio ton cocoa beans 1'600 -1'400
1'400 in addition by 2020 -2'000 1'200 79/80 80/81 81/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Jul-11 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jan-11 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
No more Combined cocoa, no X Cocoa bean price volatility chocolate/ more cocoa chocolate 2500 sales/ deals 2200
1900
1600 Cocoa powder 1300 shortage 1000
700
400 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
March 2012 Barry Callebaut – CAGE Conference London 15 Sustainable Cocoa SustainableSustainable Cocoa Cocoa Yield & quality initiative for more quality-grade, responsibly grown cocoa
300,000 tonnes of additional cocoa beans by 2020
Farmer Practices Farmer Education Farmer Health
• Plantation yield & quality • Cocoa curriculum • Water wells • Model farms • School curriculum • Vaccination program • Yield Enhancement Techniques • Literacy and women education • Insecticide nets “YES” • Child labor sensitization • Certification implementation
Aim: double yield Aim: develop next generation of Aim: improve the livelihood of (+ 800kg/hectare) farmers the farmers
Donor Funding CSR QPP + Biolands cocoa buying program/organization
March 2012 Barry Callebaut – CAGE Conference London 16 Employees – Structurally developing our people
Employer Branding Attractive presence in internet, strategic partnerships with top universities
Recruitment & Graduate Trainee Program General recruitment + Graduate Trainee Program
PMDP & Engagement Personal targets aligned with BC Strategy, feedback culture on performance, personal & career development discussions, engagement enhancing activities
Talent Management & Development Talent Pool, Marbach Development Programs Skills Workshops, Technical Training Cocoa
Succession Planning Filling of key positions from within the organization, expected rate of 70/30 internal/external hires
March 2012 Barry Callebaut – CAGE Conference London 17 Based on our strategy we achieved a 7% average annual volume growth over the last 10 years…
Stollwerck divestment 1,403 CAGR+7% 1,317 1,214 Brach’s divestment 1,166 1,130 1,052 1,050 1,011
891
761
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
Consumer Divestment Volume in ‘000 tonnes
The global chocolate confectionery market grew 2% on average per year during this period
March 2012 Barry Callebaut – CAGE Conference London 18 … which translated into higher cash flow generation and return to shareholders
15.5 CAGR +17% 14.0 12.5 11.5 11.5 493 10.5 470 434 446 407 7.8 8.0 7.0 6.9 348 313
252 228
116
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
Cash Flow as 4% 6% 6% 8% 9% 10% 9% 9% 10% 10% % of sales
FX negative impact Operating Cash Flow in CHF mio Dividend in CHF/share
March 2012 Barry Callebaut – CAGE Conference London 19 Outlook Financial Guidance
X Four-year growth targets for 2009/10 –2012/13
* X Annual growth targets on average for 2009/10 through 2012/13:
Volumes: 6-8%
EBIT: at least in line with volume growth
* Our view for the 2009-2013 period reflects current economic forecasts for the markets we operate in as well as internal developments and their assumed impact on our performance, barring any major unforeseen events and based on local currencies.
March 2012 Barry Callebaut – CAGE Conference London 20 Share performance vs. peers and indices
10 Years - CAGR (Feb 2002 – Feb 2012) 1 Year performance (Feb 2002 – Feb 2012)
Barry Callebaut 17.2% Barry Callebaut 19.8%
Eurostoxx F&B 13% Lindt 12.3%
Lindt 4.9% ADM 8.5%
-3% SPI Givaudan 5.5%
-7.1% Givaudan SMIM 4.7%
-12.2% ADM Eurostoxx F&B 4.2%
-14.0% SMIM SPI 2.1%
Source: Reuters
March 2012 Barry Callebaut – CAGE Conference London 21 10 Reasons to invest in Barry Callebaut
World leader in high-quality cocoa and chocolate products Cost Leadership along the entire value chain with a continuous improvement structure
Leader and growing presence in emerging markets World’s largest supplier of Gourmet & Specialties chocolate for artisanal customers
Proven, focused and long-term oriented strategy Recognized innovation leader Superior growth opportunities through strong positioning in outsourcing and long-term strategic partnerships with major food companies
Global chocolate service and production footprint, around 40 production facilities in 27 countries, with a strong footprint and local presence in key cocoa origin countries
Strong track record of consistent earnings and cash flow generation
Experienced, international and proven Management team
March 2012 Barry Callebaut – CAGE Conference London 22 Appendix
March 2012 Barry Callebaut – CAGE Conference London 23 Our product offering focuses on cocoa and chocolate
Food Manufacturers Gourmet & Specialties Cocoa Products
• Standard chocolate • Chocolate • Standard Cocoa Products • Cocoa Products (cocoa powder, butter, • Specialties • Coating liquor) • Certified • Fillings • Probiotic • Low fat and high fat • Re-balanced • Decorations cocoa powders • Tooth-friendly • Chocolate and cocoa • ACTICOA ® chocolate vending mixes • ACTICOA ®
• Compound • Certified products • Fillings • Specific applications • Inclusions • Decorations
% of total volume FY 69% 11% 20% 2010/11
March 2012 Barry Callebaut – CAGE Conference London 24 West Africa is the world’s largest cocoa producer – BC sources locally
Total world harvest (10/11): 4,195k MT
X 70% of total cocoa beans come others 11% from West Africa Ecuador 3% Ivory Coast* Brazil* 35% X BC processed ~540,000 tonnes 5% of cocoa beans or 13% of total world harvest Cameroon* 5%
X 61% sourced directly from Nigeria 6% farmers, cooperatives & local trade houses
Indonesia X BC has various cocoa 11% processing facilities in origin Ghana* 24% countries*, in Europe and in the USA
Source: ICCO estimates
March 2012 Barry Callebaut – CAGE Conference London 25 CAPEX development Investments support the growth of our business
in mCHF Additional growth IT Upgrade / efficiency gains existing sites Maintenance
250
CAPEX as % of sales
174 170 153 144 145
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 PLAN
March 2012 Barry Callebaut – CAGE Conference London 26 Revenue by currency
FY 2010/11 Sales Revenue
Others* 33% EUR 40%
CHF 1% GBP 9% USD 17%
* Others include: Canadian Dollar, Mexican Peso, Brazilian Real, Japanese Yen, Russian Ruble, Australian Dollar, Chinese Yuan, Malaysian Ringgit, Polish Zloty, Czech koruna, Swedish Krona, Indonesian, Rupiah ,etc
March 2012 Barry Callebaut – CAGE Conference London 27 Key Figures 2010/11 – from continuing operations Solid and profitable growth
Change in % Change in % FY FY In local 2010/11 2009/10 currencies (restated)
Sales volume [in tonnes] 7.2% 1'296'438 1'209'654
Sales revenue [CHF m] 13.3% 0.7% 4'554.4 4'524.5 CHF per tonne 5.7% -6.1% 3'513 3'740
Gross profit [CHF m] 11.4% 1.5% 659.0 649.5 CHF per tonne 3.9% -5.3% 508 537
EBITDA [CHF m] 14.3% 4.2% 432.1 414.61 CHF per tonne 6.6% -2.8% 333 343
Operating profit (EBIT) [CHF m] 15.3% 5.7% 360.6 341.1 CHF per tonne 7.6% -1.4% 278 282
Note: Due to the discontinuation of the European Consumer Products business certain comparatives have been restated to conform with the current period’s presentation.
March 2012 Barry Callebaut – CAGE Conference London 28 Balance Sheet Solid Balance Sheet with improvement of all key ratios
Change Aug 11 Aug 10 in %
Total Assets [CHF m] -8.6% 3'263.1 3'570.8
Net Working Capital [CHF m] -8.0% 888.1 964.9
Non-Current Assets [CHF m] -14.0% 1'208.4 1'405.8
Net Debt [CHF m] -9.3% 789.8 870.8
Shareholders' Equity [CHF m] -6.5% 1'217.1 1'302.3
Debt/Equity ratio 64.9% 66.9%
Solvency ratio 37.3% 36.5%
Net debt / EBITDA 1.8x 2.1x
Interest cover ratio 5.9x 5.8x
ROIC 15.5% 14.8%
ROE 20.6% 19.6%
March 2012 Barry Callebaut – CAGE Conference London 29