At the beginning of the week, winter made its first appearance in the mountains. Above 1,600 meters, quite a bit of snow accumulated. The images from the Alps are likely to strengthen the pre-Christmas feeling for many people. In retail, the festive season had already long begun - advent calendars, gingerbread, and chocolate Santas are waiting for buyers. Not only here in Switzerland, but worldwide, consumers are increasingly coming into contact with Barry Callebaut. The leading manufacturer of high-quality chocolate and cocoa products supplies both industrial food producers and chocolatiers, confectioners, and bakers. On the stock market, Barry Callebaut has not exactly been a source of delight in recent years. Instead, the share has been moving in a downward trend, which brought it close to the round mark of CHF 700 in April for the first time since autumn 2011. Recently, however, the mid-cap company has shown signs of recovery. Compared to its low, Barry Callebaut has regained nearly two-thirds in value.
Now this rebound will be put to the test. On November 5, Barry Callebaut will publish its results for the 2024/25 fiscal year (ending August 31). In addition, CEO Peter Feld and CFO Peter Vanneste will speak on a conference call. The coming week will therefore show whether the industry giant was at least able to meet its revised forecast. The CEO had to adjust the outlook three times. “Our industry has been experiencing an unprecedentedly disruptive and volatile market environment for the past 18 months,” Feld explained at the beginning of July. He was referring in part to the strong fluctuations in raw material prices – especially cocoa. In 2024, the price of this key chocolate ingredient increased by up to 180%. Just as signs of relief began to appear and cocoa futures corrected sharply, a new problem arose for Barry Callebaut’s headquarters: U.S. customs policy. In 2023/24, the company sold more than half a million tons of chocolate in North America. After Western Europe, this made the region its second most important sales market.
In fiscal year 2023/24, Barry Callebaut was still able to keep its total volume – chocolate and cocoa combined – stable. For the period ending in August, management expected a 7% decline. At the operating profit (EBIT) level, CEO Peter Feld still projected mid- to high-single-digit growth, even in the revised forecast. Previously, he had been aiming for double-digit increases. Although the company was able to pass rising raw material costs on to customers, cost discipline remains a key issue. “With our investment program BC Next Level, we will become even more agile and resilient to volatile cocoa prices, with a clear goal to increase our profitability and reduce our debt,” the top manager stated in early July. The strategy, launched in 2023, aims – among other things, through simplification of the product portfolio – to achieve savings of CHF 250 million. However, implementation of these cost reductions has been delayed.
Analysts and investors will be watching closely to see where Barry Callebaut stands in implementing “BC Next Level.” In addition to the raw figures, statements from the CEO and CFO on the current market situation are likely to attract considerable attention. Even if the SMIM-listed company delivers a somewhat bitter note next week, the Softcallable Barrier Reverse Convertible offers an attractive yield opportunity. The guaranteed coupon of the new CHF-denominated issue amounts to 10.2% p.a. This opportunity is balanced by a low barrier of 59% of the initial level. As long as Barry Callebaut’s share does not fall to or below this mark within the next 18 months, the issuer will repay the nominal amount in full. Otherwise, the partial protection lapses, and the product becomes fully exposed to the mid-cap stock’s price risk.
Barry Callebaut is one of the underlying assets in Leonteq’s leveraged product universe. Nearly 70 warrants and mini-futures allow short-term positioning on both the long and short sides. Regardless of direction, however, if the trading strategy fails, disproportionate losses are possible.
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