Barry Callebaut sees sales slide in Q1

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Barry Callebaut, the world's top supplier of industrial chocolate
to the confectionery industry, has reported a 6 per cent fall in
first quarter sales revenues to CHF1.15bn ($0.97bn) as squeezed
margins bite into the bottom line.

Despite a 3 percent rise in sales volumes, lower profits in its consumer products business unit and crisper margins on semi-finished products hit profit that slid 3 per cent to CHF55.2m ($46.73m) for the first quarter ending 30 November.

The dour figures arrive just a few months after the Swiss firm delivered a strong profit for 2004 which saw sales breaking the CHF 4 billion ($3.39bn) barrier for the first time.

"We knew that the margins on semi-finished products would be lower and that the cost savings resulting from the restructuring initiated in Consumer Products Europe at the beginning of the fiscal year would only start taking effect in the second half of the fiscal year,"​ said Patrick De Maeseneire, CEO of Barry Callebaut.

The firm also cited lower underlying cocoa bean prices as impacting sales revenue for the third quarter. Not a new situation, the Swiss firm has, in previous months, referred to lower prices affecting activities at the processing arm of the company.

The global firm that processes some 520,000 tonnes of cocoa annually out of a market of 3.1 million tonnes has cut back on this side of the business in the last year, reflecting the fall in prices.

But recent volatility due to political unrest in the Ivory Coast, that produces some 40 per cent of global cocoa crops, brought a spike in prices.

Cocoa prices before Christmas on the London futures market LIFFE closed at £863 (€1249) a ton for March 05, down from early November peak prices of £1019 (€1475) when news of a resurgence in political unrest in the African country sparked off volatility in the cocoa market.

"The violent events in Ivory Coast in November caused enormous volatility of cocoa bean prices in the terminal market in the period under review.

The group's three factories in the Ivory Coast were closed for four days. Bean purchasing activities as well as the shipping of beans and products were slowed down but Barry Callebaut has been able to meet all of its contractual obligations vis-à-vis customers,"​ said the Swiss firm in a statement this week.

Before the unrest a spate of low cocoa prices occurred as surplus production diluted the market. In August 2004 the International Cocoa Organisation predicted the 2003-2004 world net cocoa crop at 3.31 million tons and total use at 3.17 million tons, resulting in a 148,000 ton production surplus.

Cocoa production in the Ivory Coast is expected to drop from the 1.3 million metric tons (MT) produced in 2002-03 to about 1.2 million MT for the 2003-04 season. In 2002, the country - with nearly 6 million people dependent on cocoa crops - earned around $2.1 million from cocoa, a slight increase from 2001 when the crop generated about $1.9 million.

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