Barry Callebaut slides as high cocoa prices trigger more debt

By Andrey Sychev and Mateusz Dobrzyniewski

(Reuters) -Barry Callebaut shares fell on Thursday after the Swiss chocolate maker said quarterly sales volumes declined and cocoa prices had boosted its costs, raising investor concerns.

The stock was down 10% in afternoon trading and on track for its worst day since 2015, 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 fund the inflated value of its raw material inventories, issuing six bonds worth 2 billion Swiss francs ($2.23 billion) over the last six months, he added.

In the third quarter alone, the firm issued 730 million and 700 million Swiss francs in bonds.

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 ending 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 & Spruengli, whose shares fell 2%.

($1 = 0.8991 Swiss francs)

(Reporting by Mateusz Dobrzyniewski and Andrey Sychev, additional reporting by Ludwig Burger, editing by Rachel More, Bernadette Baum and David Evans)