Annual Report 2015/16 “We are the heart and engine of the chocolate and cocoa industry” Key figures 2015/16 Sales Volume EBIT Net Profit Free cash flow Dividend +2.2% +0.1% in local currencies (5.1%) in local currencies Payout ratio 39% 1.8 401.7 219.0 404.0 15.50 million tonnes CHF million CHF million CHF million CHF per share Sales Volume Sales Revenue In tonnes In CHF million 2,000,000 7,500 1,600,000 6,000 1,200,000 4,500 800,000 3,000 400,000 1,500 0 0 2011/12 2012/13 2013/14 2014/15 2015/16 2011/12 2012/13 2013/14 2014/15 2015/16 EBIT Net profit for the year In CHF million In CHF million 500 300 400 240 300 180 200 120 100 60 0 0 2011/12 2012/13 2013/14 2014/15 2015/16 2011/12 2012/13 2013/14 2014/15 2015/16 Sales Volume by Region Sales Volume by Product Group In tonnes In tonnes 11% EMEA 814,236 24% Food Manufacturers 1,192,907 Americas 507,008 Products 44% Asia Pacific 76,443 Cocoa Products 436,537 24% Global Cocoa 436,537 Gourmet & Specialties 204,780 Products 4% 65% 28% Barry Callebaut | Annual Report / Fiscal year 2015/16 in brief • Sales volume up +2.2%, reflecting above-market performance of the chocolate business (+7.6%) and intentional phase-out of less profitable contracts in cocoa products (–12%) • Operating profit (EBIT) temporarily affected by challenging cocoa products market as anticipated: +0.1% in local currencies (–3.2% in CHF); net profit down –5.1% in local currencies (–8.7% in CHF) • Strong free cash flow generation of CHF 404.0 million • Mid-term guidance1 confirmed • Dr. W. Andreas Jacobs to step down as Chairman of the Board of Directors; Patrick De Maeseneire proposed for election as new Chairman. All other Board members are standing for reelection for another term of office of one year • Proposed payout to shareholders of CHF 15.5o per share; payout ratio of 39% EMEA Americas Asia Pacific Global Cocoa Volume growth +6.6% +8.8% +10.8% (12.0%) vs. prior year . EBIT growth vs. prior year +4.4% +12.0% +17.9% (60.3%) in local currencies 1 On average for the 3-year period 2015/16 to 2017/18: 4–6% volume growth and EBIT above volume growth in local currencies, barring any major unforeseen events. Barry Callebaut | Annual Report / This is Barry Callebaut “Shaping the world of chocolate and cocoa” 1.8 401.7 sales volume EBIT More than in million tonnes in CHF million 175 years of chocolate heritage 6,676.8 CAGR sales revenue +7.4% in CHF million Close to volume growth 10,000 over 5 years employees of whom 1 in 2 works either in an origin or emerging market 19 CHOCOLATE ACADEMYTM 53 centers factories worldwide 37,500 Selling to chocolate aficionados 131 trained in 2015/16 countries More than More than 200 28 115,000 co-creation R&D centers farmers sessions worldwide trained in good conducted with driving innovation agricultural practices customers Barry Callebaut | Annual Report / Table of Content Letter to Shareholders Letter to Shareholders Overview Business at a Glance -Year Overview Risk Overview Business Highlights Financial Review Business Review Sustainability Our Approach Sustainable Cocoa Environmental Protection Employee Development Financial Reports Consolidated Financial Statements Financial Statements of Barry Callebaut AG Governance Corporate Governance Remuneration Report Glossary Agenda & Contact Barry Callebaut | Annual Report / Letter to Shareholders Overview Business Highlights Sustainability Financial Reports Governance Letter to Shareholders “Smart growth” getting traction, strong free cash flow Twenty years ago, Callebaut and Cacao Barry merged to form Barry Callebaut. Since then, we have created the world’s leading chocolate and cocoa company. Over all those years, we have remained focused on generating value in the long term for our shareholders and all other stakeholders. Our proven strategy has remained unchanged for more Operating profit (EBIT) was basically flat at +0.1% in than a decade. But through a more focused execution, which local currencies (–3.2% in CHF) and amounted to we call “smart growth”, we started this year to strive for a CHF 401.7 million. As anticipated, this year’s profitability better balance between volume growth, enhanced was affected by the challenging cocoa products market, profitability and free cash flow generation. The goal is to but also by restructuring costs related to the manufacturing generate even more value in the long term for our footprint and a negative currency translation effect, offset shareholders and all other stakeholders. by our greater focus on margins including product and We are pleased to see that this focus on “smart growth” customer mix. starts to get traction. In the past fiscal year, we managed Net profit for the year decreased by –5.1% in local once more to significantly outperform the global market in currencies to CHF 219.0 million (–8.7% in CHF). This is a our chocolate business. In our Global Cocoa business, reflection of a higher tax rate and one-off costs related to we deliberately phased out less profitable contracts. Good issuing a new bond in spring 2016. profitability in our chocolate business was offset by a Based on our efforts to focus on “smart growth”, our challenging cocoa products market, as anticipated. We also free cash flow increased significantly to CHF 404.0 million, see the very satisfactory result of our increasing focus on compared to CHF 21.8 million in the previous fiscal year, free cash flow generation. amongst other things as a consequence of lower working Our sales volume increased +2.2% to reach 1,834,224 capital and stricter discipline in capital expenditure. tonnes. Amid a global chocolate confectionery market, As a result, Net debt amounted to CHF 1,452.8 million, which declined by –1.7% according to Nielsen, sales down by –15.9% in CHF compared to prior year. volume growth in our chocolate business, including both These results have been achieved in a challenging Food Manufacturers and Gourmet, was strong and rose by market environment. We would like to thank our global +7.6%. All our three key growth drivers contributed to this team of close to 10,000 colleagues for their relentless positive development, led by Gourmet & Specialties which efforts and extraordinary commitment. We would also like grew +12.4%, but Outsourcing and Emerging Markets also to express our sincere gratitude to our customers and supported the Group’s volume increase. In Global Cocoa, shareholders for their continued trust. our intentional phase-out of less profitable contracts led to a The Board of Directors proposes a payout to decline of –12.0% in volume. shareholders of CHF 15.50 per share, compared to Sales revenue was up +8.8% in local currencies CHF 14.50 a year ago. (+7.0% in CHF) to CHF 6,676.8 million, partly driven by a better product mix and overall higher sales prices over the entire fiscal year. Barry Callebaut | Annual Report / Letter to Shareholders Overview Business Highlights Sustainability Financial Reports Governance Letter to Shareholders “The key message for 2016/17 “Twenty years ago, Callebaut and is very simple: Growth! Cacao Barry merged. Since then, It is about competitive growth, we have created the world’s ‘smart growth’ as we continue leading chocolate and cocoa to deploy our strategy, and company – with a lot of passion, sustainable growth as sustain- hard work and dedication from ability is going to play a much all our colleagues to whom I am bigger role in our agenda.” very grateful.” Antoine de Saint-Affrique, CEO Andreas Jacobs, Chairman of the Board Barry Callebaut | Annual Report / Letter to Shareholders Overview Business Highlights Sustainability Financial Reports Governance Letter to Shareholders Consistent strategy implementation Sustainability Our continued above-market growth is the result of the Inclusion in the SXI 25 Sustainability index of the most consistent implementation of our proven long-term strategy sustainable listed companies in Switzerland. Launch based on the four pillars Expansion, Innovation, Cost of HORIZONS sustainable cocoa and chocolate products. Leadership and Sustainability. In the past fiscal year, we Acquisition of Licensed Buying Company Nyonkopa in again achieved significant progress: Ghana. Introduction of Katchilè, an innovative tool for geo- traceability and farm impact measurement. Additional Expansion partnerships with customers like Tony’s Chocolonely and Expansion of existing US West Coast chocolate factory. Kim’s Chocolates for sustainable cocoa farming. Acquisition of the FrieslandCampina Kievit vending activities in Germany, making us a leading supplier of Continuing to drive “smart growth” vending powder mixes. Various new long-term agreements, The key message for fiscal year 2016/17 is very simple: for instance with Colian in Poland and Romega in Romania. Growth! It is about competitive growth as well as “smart New chocolate factory in Gresik (Indonesia) went on stream. growth” as we continue to deploy our strategy, but also about sustainable growth as sustainability is going to play Innovation a much bigger role in our agenda. More than 200 co-creation sessions conducted with We have good visibility on volume growth and expect customers to support them in their product innovation. Roll- to see a positive contribution to profitability from our Cocoa out of our new Barry Callebaut Studio concept at the most Leadership project, supported by some recent recovery in important trade shows in Europe and the US. Two relocated the cocoa products market. CHOCOLATE ACADEMY™ centers opened in Mumbai On this basis, we confirm our three-year guidance, and Moscow. First Beverage Academy opened in Kageröd, which is on average 4–6% volume growth and EBIT growth Sweden.