Barry Callebaut shares rise after strong FY24 results and optimistic FY25 outlook

Investing.com -- Shares of Barry Callebaut (SIX:BARN ) rose following its results, which showed a stronger-than-expected performance despite a slight decline in fourth-quarter volumes. 

At 6:29 am (1129 GMT), Barry Callebaut was trading 3.1% higher at CHF 1,589.

The company reported adjusted EBIT of CHF 704 million, about 7% ahead of analyst consensus, reflecting higher profitability per tonne. 

Volumes were broadly flat year-over-year, with the fourth quarter seeing a slightly steeper decline of 1.2%, mainly due to weaker performance in its Food Manufacturer segment. 

However, the Gourmet segment performed better, with growth of 6%, although this was a normalization from the double-digit growth seen in Q3.

While volumes were in line overall, the positive surprise came from Barry Callebaut's ability to pass through higher financing costs, which provided an estimated CHF 55 million tailwind for the year. 

Additionally, the company reported savings from its Next (LON:NXT ) Level program, totaling CHF 18 million for FY24, in line with guidance. The program is expected to continue generating savings, with a target of 70-80% of the run rate achieved by the end of FY25.

Barry Callebaut’s guidance for FY25 aligns with consensus expectations, projecting flat group volumes with slight growth in Global Chocolate, offsetting a decline in Global Cocoa. 

Analysts at Barclays (LON:BARC ) suggest that the company’s strategy of prioritizing its cocoa supply internally in a constrained market is playing a role here. 

Cocoa prices remain high, which could pressure customers' profit margins, and the company’s volume guidance for FY25 may benefit from outsourcing trends that could pick up in the second half of the fiscal year.

“Next year's guidance looks in line with consensus, which we find reassuring, with flat volume growth (uncertain demand following high price hikes) and double-digit adjusted EBIT growth at currency neutral,” said analysts at Stifel in a note.

Barry Callebaut is guiding for double-digit EBIT growth in constant currency for FY25, with financing cost pass-through and Next Level savings expected to drive the majority of this growth. 

Analysts expect the company’s EBIT to be in the range of CHF 750 million, which would surpass consensus estimates prior to the earnings report. However, foreign exchange fluctuations could pose a headwind of about CHF 20-25 million for EBIT.

Free cash flow for the year came in at an outflow of CHF 2.3 billion, worse than the consensus estimate of CHF 1.7 billion, primarily due to increased margin calls on cocoa hedging. 

This is seen as a timing issue that could reverse in future periods, and analysts are not overly concerned about the FCF miss. The company also maintained its dividend at the expected level.

Analysts at Barclays believe that despite a somewhat weaker exit rate for FY24, Barry Callebaut’s outlook on both volumes and EBIT growth remains reassuring.

“Over the long term, the group targets low to mid-single-digit volume growth to fuel mid- to high single-digit EBIT growth, to gradually reach an EBIT margin of 10% (in our view, the margin is more a function of input costs than execution because of the cost-plus model),” Stifel said. 

Source: Investing.com