BRRLY - Barry Callebaut: Victim Of The Cocoa Prices And Working Capital Needs

2025-04-14 10:30:00 ET

Summary

• Barry Callebaut faces challenges from high cocoa prices, impacting working capital and net debt, but remains profitable with a slow recovery.
• The company expects double-digit recurring EBIT growth despite lower sales volumes, but FX fluctuations may affect reported results in Swiss Francs.
• Full-year guidance adjusted; sales volume to decrease mid-single digits, but dividend remains at 29 CHF per share, yielding almost 4%.
• Considering a contrarian investment approach, I hold a small long position in Barry Callebaut, anticipating lower cocoa prices and potential gains.

Introduction

About 1.5 years ago, I thought the worst was behind us for Barry Callebaut ( BYCBF ) ( BRRLY ) but I jumped the gun as the extremely high cocoa prices are still having a profound negative impact on the business case. The company remains profitable, but the higher inventory values were (and are) having a very negative impact on the company’s working capital needs. The company is guiding for a double-digit recurring EBIT growth on lower sales volumes, but the recovery is much slower than I had anticipated. ...

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