(Reuters) – Barry Callebaut shares slid on Thursday after the Swiss chocolate maker reported nine-month results that raised investor concerns over the impact of higher cocoa prices on its cash flow.
The stock dropped by 9% in morning trading, on track for its worst day since 2015, to 1.452 Swiss francs per share and was the worst performer on the Europe-wide STOXX 600 index.
“The market realizes that the high cocoa bean price is having a significant impact on the free cash flow and the financing costs,” Vontobel analyst Jean-Philippe Bertschy said.
Barry Callebaut is borrowing heavily to offset pressure from surging cocoa bean prices, issuing 6 bonds worth 2 billion Swiss francs ($2.23 billion) over the last six months, he added.
The company, in an earnings presentation, flagged a negative impact of 1.1 billion Swiss francs from higher bean prices on its free cash flow in the first half of its fiscal year which ends in August, and hinted at further burdens in the second half.
Barry’s chocolate sales volumes fell 0.3% in its third quarter ended in May, while in Eastern Europe they dropped by 7%.
The bigger slowdown in the region might be an early indication of risks stemming from further price increases globally, as they look higher than the average levels of the past, said Baader Helvea analyst Andreas von Arx.
Cocoa bean prices were 131% higher in the nine months to May 2024 than in the previous comparable period, according to London terminal market prices.
The impact of Barry Callebaut’s stock performance also weighed on peer, Swiss chocolate maker Lindt & Spruenlgi, whose shares fell 2%.
($1 = 0.8991 Swiss francs)
(This story has been corrected to say that the stock is on track for its worst performance since 2015, not a nine-year low, in paragraph 2)
(Reporting by Mateusz Dobrzyniewski and Andrey Sychev, Editing by Rachel More and Bernadette Baum)
