EU CONSUMER STAPLES: Barry Callebaut; FY25 Results

(BARY; Baa3 Neg/BBB- Neg/NR)

Strong credit positive; the WC swing is much better than we expected leaving leverage at 4.9x (exp. 6.4x). The earnings is in-line with guidance, which continues to demonstrate Barry's pricing power; it has boosted profits while its clients (Mondelez, Hershey's) have seen sizeable pain. We still see Cocoa prices in the driver seat which are holding supportive for now (i.e. WC > 0). It is guiding to another -1x of deleveraging if Cocoa holds around £5k.

• Cash flows are better than we expected; FY WC swing was -460m vs. our expectation for -1.3b.
• Earnings are in-line with guidance; adj. EBIT at 703m +6.4% ex. FX, net unch y/y
  • Volumes -6.8% but revenue +49% on pricing. Gross profits +8%
• Statutory EBIT at 635m is better than we expected and +42% y/y.
• It left net debt at CHF4.3b (vs. 3.8b LY), levered adj. 4.5x (4.9x on statutory)
  • That is down from 6.5x at 1H and only marginally up from the 4.0x to end last year
• Net interest cost at 377m, in line with guidance. Leaves interest cover at 1.7x (vs. 2.2x LY)

FY Guidance

• Deleveraging below 3.5x, based on Cocoa price of £5k (currently £4.8k)
• Volume down mid-single digit (is indicating expects better 2H)
• adj. EBIT to rise low to mid-single digit ex. FX
  • Statutory to face CHF60m expense on cost saving programme (in-line with amount this year)