Barry Callebaut sided with investors forecasting a surplus
in world cocoa output this season after all, but unveiled a further slowdown in
its own volume growth, against a backdrop of a "challenging" cocoa powder market.
The chocolate giant, which processes 23% of world cocoa
production, highlighted the impact of rains in supporting surprisingly strong
output of the bean in West Africa, the world's top producing region, during the
current April-to-September mid-crop harvest.
"A good start to the mid-crop cocoa harvest… could turn an expected
deficit for the 2013-14 season into a slight surplus," Swiss-based Barry Callebaut
said, stoking a longstanding market debate.
Rival crusher Olam International, for instance, has forecast
a 100,000-tonne deficit in 2013-14, which ends in September, while the International
Cocoa Organization in May forecast a 75,000-tonne deficit, only to signal last
month a revision to a 30,000-tonne surplus.
Funds sell, trade
The debate has stalled a rally in cocoa futures in London at
just under £2,000 a tonne, although this still represents the highest level in
Barry Callebaut said that ideas of a surplus meant that "funds
consequently sold a significant share of their net long position" in cocoa
derivatives, but "some industry buying promptly supported prices".
There is still a widespread expectation that world cocoa output
in 2014-15 will fall short of demand.
The higher price has contributed to pressure on the
so-called "combined ratio" –the value of cocoa powder and butter, the main processing
products, compared with the price of raw beans.
The combined ratio has been "softer than expected", falling
to 3.0, down from levels above 3.5 in the autumn.
The weaker combined ratio, well below average levels over
the past decade, reflects in particular a weak market for cocoa powder, used in
making the likes of chocolate biscuits and ice cream, rather than cocoa butter
attributed with giving chocolate bars melt-in-the-mouth qualities.
The cocoa powder ratio has fallen below 0.6 for the first
time in at least 12 years, while cocoa butter ratios are at a historically high
"The cocoa powder market remains challenging," said Juergen
Steinemann, the Barry Callebaut chief executive.
Some attribute the markets' divergence to the revived
fortunes of Western economies, in which chocolate bars are particularly popular,
compared with those in Asia, the top region for powder consumption.
Margins vs volumes
The group said that the market conditions had contributed to
a slowdown in growth in sales volumes to 2.4%, excluding acquisitions, in the
September-to-May period, the first nine months of its financial year.
Barry Callebaut, which has a mid-term target of 6-8% volume
growth per year, reported a rise of 3.1% in sales in the September-to-February
"As we continued to focus on increasing product margins, we
concentrated on selective growth in developed markets," Mr Steinemann said.
In Europe, while sales volumes rose by only 0.2% to 553,291
tonnes during the nine months, by value they rose 10.0% to SFr1.92bn.
Group sales came in at SFr4.31bn for the nine months, up 22%,
accelerated by the acquisition of Petra Foods' cocoa business, excluding which
revenues rose by 6.8%.
Barry Callebaut shares stood 2.5% lower at SFr1,198 in lunchtime deals.
Cocoa futures for September stood £1 higher at £1,932 a tonne in London, and $1 lower at $3,116 a tonne in New York.