Barry Callebaut AG (BARN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to our Full Year Results 2020/'21 Media and Analyst Presentation here live in Zurich and on the webcast. My name is Claudia Pedretti, I'm Head of Investor Relations, and I'm happy today to be here today with our CEO, Peter Boone; and our CFO, Ben De Schryver. Please be reminded that the information given during this conference contains some forward-looking statements, which reflect the best of our current knowledge, while actual results may be different. Furthermore, we would like to inform you that this webcast is being recorded. This is the agenda for today. Peter will present to you the highlights of the full year 2020/'21, and then Ben will update you on the financial results, followed by Peter's remarks on strategy and ESG before sharing the outlook with you. We will finish the webcast and the conference with a question-and-answer session. Please note that if you have -- if you want to ask a live question on the phone, you need to dial in by your phone. Instructions will be given once more to you at the end from the operator. And with that, I hand over to Peter.

Thank you, Claudia. So good morning, ladies and gentleman. Welcome to our full year 2020/'21 results conference. You saw it mentioned on the opening slide, this is a special year for Barry Callebaut, and of course, also one for myself. First of all, we celebrate our 25th anniversary this year. And although I'm part of Barry Callebaut already for 9 years and part of the Executive Committee for 9 years, I'm proudly present for the first time as the CEO of the group. It's also special here as we are able to welcome you here in person this year. And this makes me, in particular, happy, as you maybe know, I was the old Chief Innovation Officer at the start of my career in Barry Callebaut. So it offers us the opportunity to share some innovations with you to let you taste it at the end of the meeting, something to look forward to. So we are happy to share today that we have returned to a healthy growth path. As anticipated, we achieved over the fiscal year and is still a volatile environment, a strong volume recovery. The disciplined execution of our smart growth strategy led to good profitability and a good strong cash generation. Sales volume went up with a healthy 4.6% in all regions and all key growth drivers contributed to this success. Strong volume recovery and a positive product and customer mix enabled operating profit, our EBIT to grow significantly faster than volume, which was up 18.9% in local currencies. Last but not least, we also continue to strengthen our balance sheet and reached a strong free cash flow of CHF 355 million. Ben will share later in more detail. But at least, I hope you agree a set of good results. This chart, I assume you have seen before. It shows our volume development per quarter for chocolate and for cocoa. Overall, of course, versus a relatively weaker competitor, we've seen a very strong recovery. It's still a volatile environment with ongoing COVID-19 restrictions and continued limitations for some distribution channels. What's in particular, nice to see on this graph is that our chocolate business showed strong growth of 6.5% growth in 2020/'21, outpacing the underlying markets in all regions and even surpassing the pre-pandemic volume levels of 2018 and '19. Then cocoa in a volatile market, we continue to focus on smart growth. Volume turned positive in the second half, and that helped us to limit the decline to 2.6% for the year under review. Overall, we believe a resilient results. So let's have a closer look at the growth drivers on the next slide, which all contributed to these great results. Let me start with Gourmet & Specialties because Gourmet & Specialties return to healthy growth with an impressive 18.3%. This is the positive outcome of our approach to cease the crisis as an opportunity to sharpen our business model by broadening our customer footprint, adding capabilities and deepening our geographical reach, which should continue with further easing of COVID-19 measures globally. Then emerging markets. Emerging markets volume grew 9.7% driven by key markets like Russia, Brazil and India. Long-term partnerships and outsourcing contributed to a solid 4.5% growth to the recovery. The over 32,000 additional tonnes came from existing partnerships, so the growth of existing partnerships and new outsourcing deals across all regions. As you can see on the slide, it was also a year where we were not short of important milestones. They all added up to a consistent and continued growth path of the group. But I'd like to see, we expanded our customer and geographic footprint, laying the ground for future growth. We opened a new chocolate factory in Baramati, India, the world's second most populous country and one of the fastest-growing chocolate markets. We opened a new state-of-the-art factory in Norderstedt, which will serve as a regional hub to address the rapidly growing chocolate market in Southeastern Europe. And this new factory will supply Atlantic Stark with whom we signed a long-term outsourcing agreement in the last year. We also opened the third factory in Kaliningrad, Russia, Russia becoming an important market for us. We opened the CHOCOLATE ACADEMY in China, in Serbia and in Dubai, growing the network now to 25 chocolate academies around the world. And with the opening of the Chocolate Box in local Belgium, the world's largest and most sustainable chocolate distribution center, we are further building our cost leadership and accelerating our customer service. We also kept making progress on our plan to make sustainable chocolate the norm, a topic which is very close to my heart. Both Sustainalytics and CDP recognized us for the third consecutive year as a leading company on sustainability and carbon reduction. Through our innovation, we are catering to the consumer trends of today, and making a way for the consumer trends of tomorrow. We can cater now to the growing consumer demand for plant-based alternatives, plant-based, a big segment and a segment here to stay. With the first fully segregated dairy feed chocolate factory, we opened in Norderstedt, Germany. The pandemic accelerated consumer interest in their own health as well as in the health of their environment. We call this mindful indulgence. Among other things, we launched in Taiwan, a new chocolate drinking powder with less sugar and our low-carb sustainable chocolate with no added sugar in Japan. And it's not only production innovation we bring, we also reinvent ourselves in how we interact with our customer. In the past fiscal year, we continue to drive the full potential of digitalization. We doubled the number of professional trains by our CHOCOLATE ACADEMY Centers, of which many courses took place fully virtual. Personally, also very proud on what we do to shape the future of our industry. To cater to the trends of tomorrow, we leveraged our deep scientific knowledge of the cacao fruit, and the fruit supportive health effects by introducing the first nutraceutical fruit drink called Elix, with health benefits, but also taste great, as you will taste lately, I hope. And those in the room will therefore have the opportunity to taste it themselves. Our global Gourmet brands are leading on innovation trends driving creativity and craftmanship and providing sustainable solutions for the future. But instead of me talking, let us show a video that brings it to life the best. [Presentation]

Yes. Amazing video, and making me very proud on the one hand, of course, are the great results, but also the many, many great achievements of the Gourmet teams around the world. And with that, let me hand over to Ben.

Thank you, Peter. Good morning, ladies and gentlemen. It's a pleasure to be back here in front of a live audience to present the financial review for full year 2020-2021. As Peter highlighted, we had a strong volume recovery in a still challenging market environment with a volume growth of 4.6%, we returned to a healthy growth path. Our sales revenue amounted to CHF 7.2 billion, up 8.7% in local currencies and therefore, outpaced volume growth on the back of rising raw material prices and positive product mix. Operating profit EBIT increased by 18.9% in local currencies or 15.4% in Swiss francs compared to the prior year EBIT recurring and amounted to CHF 566.7 billion. Net profit for the year grew by 24.2% in local currencies and amounted to CHF 384.5 million. Strong free cash flow generation continued and amounted to CHF 355 million compared to CHF 317 million in the prior year. We get back in more details in the coming slides. Let's first take a look at our regional performance on Slide 13. All regions can outpace the underlying markets and contributed to the healthy growth volume and good profitability. In region EMEA, volume returned to its healthy growth path with 5.5% in a progressively improving market environment and is based on our efforts to sharpen our business model and broaden our geographic reach. Both food manufacturers and Gourmet & Specialties contributed strongly to the recovery in a still challenging market environment. Thanks to these efforts, not only our volume recovered to a healthy growth plan, but also our profitability returned strongly. In Region Americas, volume growth accelerated in the second half, leading to a strong 7.9% volume growth in 2020-2021. This was achieved, thanks to continued strong volume growth from our food manufacturers and accelerating volume growth in Gourmet & Specialties across the region, thanks to our sharpened business model and broadened reach. Operating profit EBIT in the region showed a strong resilience throughout the pandemic. With an 8.4% increase in the year on the review, the region continued to deliver healthy profitability. In Region Asia-Pacific, the good growth momentum continued with an 8.7% despite regionally reinstated COVID-19 restrictions. Food manufacturers continued its solid and broad-based growth, Gourmet & Specialties volumes growth accelerated supported by global and local brands. The improved product mix in the year under review was driving the strong EBIT growth in local currencies. In our Global Cocoa business, volume declined by 2.6%. The focus on smart growth mitigated the impact of the unfavorable market environment. However, operating profit EBIT was impacted by higher energy costs in West Africa as well as higher global freight costs. Excluding these additional costs, EBIT in local currencies grew by 2.2%. Going back at group level. Let's take a look at the gross profit bridge on Slide 14. The volume recovery in the second half had a strong positive impact on our gross profit. The strong volume recovery in Gourmet clearly boosted the mix effect, but also the high demand for value-added products in the industrial business contributed a lot. The Cocoa business had a positive contribution, which is a testimony of the resilience and reduced dependency in a market environment that remained volatile and challenging. Please note that the currencies had a strong negative translation effect of CHF 32 million. The cocoa combined ratio showed, as you know, the relationship between the market prices of cocoa butter and powder in relation to the underlying cocoa bean price. This is a forward-looking curve. Results are normally seen over a 6 to 9 months period. This is also the European ratio, which is the most relevant. We run a global business. And as you know, the combined ratio gives only a broad indication on the industry's profitability, but it does not reflect some important variables such as country differentials or the LID. As mentioned before, the market environment remains volatile, with global cocoa supply and demand out of balance due to good crops in the main cocoa-producing countries on the one hand and the decreased demand as a result of COVID-19 pandemic on the other hand. The average combined ratio remained about stable compared to prior year with very resilient cocoa powder prices, while cocoa butter prices were under pressure related to the lower demand for chocolate due to COVID-19, the pandemic. The smart growth execution and our improved position, thanks to our Cocoa Leadership project helped us to absorb these market fluctuations better, while we are not completely immune against them. Now let's take a look at the operating profit development on Slide 16. We delivered a strong EBIT growth in local currencies of 18.9% compared to prior year recurring EBIT. Currencies continued to have a negative impact of CHF 17 million, resulting in an absolute EBIT of CHF 567 million. The strong volume recovery and our focus on smart growth continued -- contributed CHF 115 million additional gross profit. As expected, SG&A costs came back with a return business momentum, following the subdued levels in our prior year due to COVID-19 restrictions. However, we contained good cost management, which is proven by the fact that the SG&A costs are at a comparable level as pre-COVID in 2018/'19 at constant currencies. In the next page, we show you the development of -- from EBITDA to net profit for the full year 2020-2021. Financial items were stable around CHF 101 million on the back of lower interest rate environment and reduced short-term debt. Income tax increased to CHF 81 million, largely in line with the higher net profit, and the group's effective tax rate amounted to 17.3%. This resulted in a reported net profit for the year of CHF 385 million. Compared to prior year recurring and excluding the negative currency translation effect, the net profit amounted to CHF 397 million, an increase of 24.2%. On Slide 18, you can see the long-term development of our key raw materials. Please be reminded that the vast majority of Barry Callebaut's business is running on a cost-plus model, passing on price fluctuations of raw materials. The volatility of these input prices normally does not affect our profitability. However, it has an impact on our working capital. The terminal market price for cocoa beans remained volatile and fluctuated between GBP 1,607 and GBP 1,869 per metric tonne. On average, cocoa bean prices decreased by 7% compared to the prior year period. World sugar prices increased on average by 22.3% on the back of strong demand from China in combination with the poor Brazilian crop. In Europe, sugar prices increased on average by 3.6% during the fiscal year under review. Dairy prices increased on average by 11.6% on the back of strong demand from Asia in combination with growing concerns about supply and logistics. As part of our smart growth strategy, we continue to focus on improving our balance sheet and free cash flow generation. So I'm very glad to show you again, strong adjusted free cash flow of CHF 315 million on this Slide 19. Let me explain to you how we achieved this. As expected, working capital increased, however, at a slower pace than the group's volume growth. The effect of receivables increasing in line with regained business momentum was largely offset by higher payables and good inventory management. Interest and income taxes amounted to CHF 163 million, CHF 40 million higher than in prior year, as a result of higher taxes in line with the higher net profit, while financing costs remain roughly stable. We continue to invest in our capabilities, which enable future growth and capital expenditure of CHF 275 million, was around the same level as in the prior year. The reported free cash flow amounted to CHF 355 million, as the effect of cocoa beans regarded as readily marketable inventories, RMI, was positive this year compared to last year. Our net debt was further decreased by CHF 85 million. This reduction was attributed to the early partial repayment of the Schuldscheindarlehen and the decision not to roll forward commercial paper. The decrease, however, was partially offset by higher long-term lease liabilities, which increased by CHF 79 million, as a result of the opening of the group's global distribution center in Lokeren, Belgium and the relocation of our head office in Zurich, Switzerland. Considering the beans, the cocoa beans in inventory as ready marketable inventories, RMI, the adjusted net debt decreased by CHF 47 million to CHF 547 million at the end of August 2021. Now let's have a look at the key balance sheet numbers and ratios on Slide 21. Our net working capital increased to EUR 1,242 million, as expected on the back of regain business momentum. Our ROIC and ROE increased by 160 basis points to 12.2% and by 110 basis points to 14.3% and returned close to pre-COVID levels on the back of improved mix, which was reflected in the higher operating profit EBIT. As mentioned before, the adjusted net debt decreased further leading to the adjusted net debt-to-EBITDA ratio improving to 0.7x compared to 0.9x in the prior year. The Board of Directors will propose to the Annual General Meeting of Shareholders a dividend of CHF 2 per share, which corresponds to a payout ratio of 40%. To protect the health of our shareholders and employees, this year's Annual General Meeting of Shareholders will take place once more without physical presence. Voting rights can be exercised electronically or in writing. And with that, I give the word back to Peter.

Thank you, Ben. So let me share a few words on our long-term strategy and how we continue our growth path as a company. You probably know this slide by heart. It's a slide at least we present and we work with already as long as I'm with Barry Callebaut. And it will be a one we will be staying close to as long as I'm a leader of Barry Callebaut. And therefore, we stay very consistent to our long-term strategy. We are a growth company, and we will remain a growth company. We will continue to focus on the 4 strategic pillars, the 4 differentiators, which makes us different and make us stand apart from our competition, expansion, innovation, cost leadership and sustainability, having continued our growth path with a smart execution and focus on the return and on cash generation. We are remaining very consistent in the long-term strategy. As a new CEO, I will emphasize the acceleration of the value letter. We want to be the preferred solution provider for our customers, and we know we have so much more value added to offer than we do today to our customers. This acceleration will be achieved in various ways. First of all, expansion. I see opportunities to further leverage our footprint across the globe from developed to emerging markets, continuously broadening our capabilities and serving customers regardless of the geographic location. Second, acceleration will be achieved through innovation, a topic, I'm particularly passionate about as the former Chief Innovation Officer. I want Barry Callebaut to firmly remain a leader on innovation, catering to trends like plant-based, sugar-reduced or better-for-you and create a feature of sustainable chocolate solutions. Through scale, leveraging and efficiency along the value chain, I see us reinforcing our cost leadership and create value for our customers better than anybody else. And last but not least, we offer customers industry best impactful sustainability programs through Forever Chocolate, which I was proud to launch back in 2016 myself. We became leader of the movement to make sustainable chocolate the norm. In the coming years, this is how we will create value for our shareholders. On December 3, we will publish our fifth Forever Chocolate progress report, providing a full overview of the progress we are making against these hard commitments. But let me give you already a few highlights of the achievements in the past year, achievements I and all my colleagues are very proud of. First and foremost, we lifted close to 250,000 cocoa farmers in our supply chain out of poverty, 250,000 cocoa farmers. We have reduced our carbon intensity by more than 70% since 2016. Our child labor monitoring and remediation system is covering over 220,000 farmers in Côte d’Ivoire, Ghana and Cameroon. And in 2020-'21, 43% of our products sold contain 100% sustainable sourced cocoa and chocolate. But as I said, stay tuned for more details, which we will share on December 3. At Barry Callebaut, we are committed to nurturing an exclusive environment. This is why we launched in January 2021, #oneBC, our diversity and inclusion strategy. It sets ambitious measurable targets to improve our gender balance and cultural diversity at senior management levels by 2025 because we are making progress, but we are not there yet. Let me also say a few words about governance in our Board of Directors. All members will stand for a reelection for another term of office of 1 year. The Board of Directors proposed to elect at the AGM in December, Antoine de Saint-Affrique, as a new member of the Board. You all know Antoine well as he served as Barry Callebaut's CEO from October 2015 until August 2021. We also recently announced changes to the executive committee. We have been able to fill all positions with talent coming from within the organization and people with whom I have been working in the last years. With these changes, we have an executive team well-positioned to continue our growth plan. Ladies and gentlemen, let me summarize and give you an outlook. We are on track to accelerate along the value ladder, and I see a lot of opportunities out there. I'm therefore confident and we'll deliver on the midterm guidance. Before we move on to your questions, let me say a few words related to our 25th year's anniversary. In 1996, Klaus Jacobs had a vision to merge 2 iconic chocolate makers, Callebaut and Cacao Barry, to build the world's best cocoa and chocolate company. During the past quarter-over century, we have consistently built on a vision to become the leading manufacturer of high-quality chocolate and cocoa products. Our story over the past 25 years is, of course, above all, a story of our people. Out of 12,500 Barry Callebaut colleagues, their customer focus and entrepreneurial spirit have been a driving force behind our successful growth journey. So a big, big thank you to all of them. And with this, ladies and gentlemen, I conclude this presentation and would like to open up the floor for questions. Operator, could you please start.

[Operator Instructions]

Danny Burki from ZKB. I would have a question on inflation environment you have. Where do you see strong cost inflation? What is covered by your cost plus? And maybe as a reminder, your cost of goods sold are about 85% of your sales, what would be the split, raw materials, energy, freight, direct labor, just roughly?

I will -- if you allow me, Peter, I will start and then please chime in if I miss something. First of all, indeed, there is inflation around in the market. But I want to reiterate that our cost-plus model is covering that as well because overall, the way that we price to our clients, it's not only just the raw materials, but is, of course, covering the freight cost and so on as well and the manufacturing cost as well. So we are best weathered to -- in an inflationary environment. We're just -- also in -- we're running a global business as well. Yes, it's fair that we see more inflation in North America and in Europe in areas where we're not used to it anymore. But in the same time, we're also running a business in Asia Pacific or Latin America where we're very used to inflationary items that can go up to a couple of percent as such. Overall, we are very well weathered. And yes, you're right, in terms of the overall cost raw materials is the biggest part of it. I just want to highlight something there on the raw materials in inflation. We have not seen it in cocoa. You saw it also on the cocoa bean prices. Actually, cocoa as a key cost factor towards chocolate production actually has remained quite stable, quite low compared to historical averages. That's something we have not seen in other soft commodities as well. So overall there, when you look at the majority of our cost, it is in the raw materials, not necessarily manufacturing or energy prices. So -- but nevertheless, we are best positioned with our cost-plus model.

Do you give the split of your costs?

Yes. So we don't give a specific splits on it as well. But what I can say is that the majority is raw materials. Sorry, Daniel.

And no surprises for our customers. If we have long-term partnership with our customers, they know the way how we build our contracts with the open costing. And in that sense, we are, of course, in a daily interaction with them. We are a customer-focused business. We are looking with them at solutions, but on the raw material side, they know we work with a cost-plus model.

About your outlook. So you've confirmed your midterm outlook of 5% to 7% volume growth. We were below for the first year of your 3-year cycle. So can we take that to mean that this year, you're expecting to see an increase over what we've seen in the past year?

Thank you, Silk. And so we don't give kind of annual guidance. It's a midterm guidance. But hey, we are absolutely confident with the results we are presenting today that we have the momentum to deliver on the midterm guidance. Of course, on the one hand, you see our chocolate business growing at 6.5%, which gives us a lot of confidence that's broad-based across our regions. We see Gourmet accelerating. And we believe that the challenging market environment we face in cocoa, we are successfully navigating that, but we also believe there's a time where we will get out of that, and that will help us to deliver against our midterm guidance.

It's Jörn from UBS. Two to 3 questions, please. The first one would be if you look on your chocolate business in total, do you feel comfortable with the product categories you have at the moment you can grow mid-single digit also for the next 5 to 6 years? Or is your strategic road map also considering new categories you want to enter? This will be the first question, please. And shall I take it step by step or how do you prefer it?

I can take this one. So let's take this one. We are a chocolate company or we are the leaders in high-quality cocoa and chocolate, no chocolate without cocoa. And in that space, there is still a lot of growth. So please understand me well. Yes, we are innovating. We try to create new products, but our core business is the core business of chocolate and cocoa. And there, I believe we still have so many opportunities that we can drive our growth in line with our midterm guidance for the years and years to come. Of course, we have launched an Elix product. That was a very interesting product for us because it is based on the deep expertise we have of the cacao fruit. Of course, the cacao fruit produces the cocoa bean, which is important for chocolate, but has much more in depth. And leveraging that, on the one hand, to bring a new product, which is quite revolutionary, a nutraceutical fruit drink, but also, of course, as a way to commercialize the cacao fruit further in an attempt to bring more value to our farms. So -- but the key message is we are a chocolate and cocoa company, and I see that driving our growth for the midterm.

And then maybe a second and third question, if I may. And the second question would be, please, on Gourmet, I. think it was the target to grow it by high single digit. Do you think this is still valid for the next couple of years? And if yes, can you give us some concrete examples, new regions you're entering new customers, which you are exploring at the moment, are you making progress?

Yes. It is amazing, the performance we see at this moment in Gourmet around the globe. And that is pretty broad-based. I think that team, our whole business, I think, but definitely also the Gourmet team in a pandemic as an opportunity. They have looked at, of course, where the market was going down, the distribution channels were going in lockdown and they were forced to look at other segments, other customers, other regions to grow. To call out a number, we have added in the last year 3,000 new customers in the Gourmet business. That's a lot of new customers with which to grow. And we have entered new regions. I can just tell a personal experience. We were not that strong in Northeast Brazil. We have successfully just entered that region and are gaining our share. So we have added all from a geographical point of view, all from a customer point of view, we have added new levers of growth. And you can imagine, if now all the old traditional distribution channels come back, that will further keep driving our Gourmet business. So I'm confident that, that will be one of our key growth drivers going forward.

And the last question, if you allow me, it's a technical one in your food manufacturing business. Do you see prospects to improve your gross profit margin there? Or will volume discounts offset the mix benefits going forward?

Food manufacturing is a big business for us. It's 70% of our business. So also there, we are driving mix. So we are driving mix from a customer mix point of view. We're also driving mix from a product point of view. So absolutely, everyone working on food manufacturing has also the objective to drive smart growth and look to see how we can drive for growth, but definitely in a profitable way.

So you're confident to improve your gross profit margin in FM?

In the end, we drive to a guidance on the overall business. And of course, we have certain part of our business, which are more accretive than others But also within the FM business, absolutely, we cannot afford to not drive for increased profitability.

If I may add to that point as well is you asked a question about Gourmet. Of course, we want to grow Gourmet faster because that's overall in the mix. But Gourmet can also not live without food manufacturer. It can also not live without cocoa. It's very important that we work on the 3 areas, not only on just 1 division and for food manufacturers as well, there is a lot of intimacy that we have coming from the chef world, from the artisans, that's actually giving us a lot of credibilities and opportunity for margin as well to the larger FM clients. So that's very important that we have that. That's the nature of Vericolor. So all of the 3 divisions working very well.

It's a very important point that Ben is making because that's what we try to capture with accelerating of the value ladder because, hey, there's still a lot of doors we can open in chocolate and cocoa around the globe, but we're also sitting at a table with a lot of customers to further add value to those customers and add value through sustainability programs, add value through innovation, add value by showing where trends are going in Japan or in Santiago to Chile. That's the way how we start to add more and more value to our customers. And in that sense, it's a driver of our smart growth rate.

This is Pascal Boll from Stifel. I have a couple of questions. So first of all, regarding profitability. Bit per tonne this year by 12%. But you are -- even though you are volume-wise on 2018, '19 levels, you are in terms of EBIT per tonne still below those levels. We expect to reach these old levels? Or is it something that will persist at those levels we see right now?

I will start answering. First of all, as you noticed as well that is still a translation currency impact. So when you go back in time as well, there is also a translation impact as that. So we're still slightly below on EBIT per metric tonne compared to '18-'19, but not that far. Definitely, it is the ambition to regain. That's part of our midterm plan as well that we want to be above on EBIT level compared to volume. So yes, indeed, EBIT per metric tonne should go up.

And let me use one example there because we have seen that the cocoa business is a challenged business in terms of market environment. But still, that team, where their business was slightly declining, they still focus a lot on the premium powders. They still focus a lot on the branded part of their business, and they were able to increase the kind of EBIT per tonne throughout the last year. So it is -- throughout our business, we are always trying to find that added value. And I'm sure therefore, we will restore where we were before COVID.

Okay. Next question regarding your outsourcing pipeline. Can you elaborate a little on that? I think you mentioned that due to the pandemic, a lot of projects got delayed, should we expect an acceleration now again? Or is this -- do we see the usual course of things?

I'm 9 years with Barry Callebaut, and it's -- you can never fully predict with what kind of pace the opportunities will arise, but they will come through. And we're -- even in a pandemic we have seen that we could deliver 32,000 tonnes with 3 new outsourcing long-term agreements. We have renewed the partnership. I'm personally very proud of that, the partnership with Hershey. And yes, also this pandemic has challenged a lot of customers, always reviewing how they can become more efficient, how they can set themselves up for success for the future and outsourcing is, in many cases, also part of our discussion with them. So we have a guidance of 30,000 to 40,000 tonnes per year. We are comfortable to keep delivering it.

Okay. Then on Gourmet Specialty, you mentioned you added 3,000 customers. For how much of the volume to these 3,000 customer account? And -- or in other terms, at what discount of usual capacities to your old customers at the moment, run their business? So what can we expect when old business returns in combination with new business going forward?

I hope I understood your question well. But yes, 3,000 new customers, really in new segments where our Gourmet team identified customers out there, which absolutely were in need of our service, of our products, of our services. And that has been a good business for us. So I hope that we can sustain those customers, that we keep them with them as long as they are profitable, while the traditional business will come back.

Pascal, if I just might add, overall, the new customers that we have added overall the different segments that are going in with Gourmet is still accretive to the overall result of Barry Callebaut. It's still very interesting as well. There are differences that there are higher and chocolate tiers and so on. There are some doughnuts and other players and so on. Different products, of course, different geographies have a little bit different profitability. But for me, the key message is that it's still accretive to the overall Barry Callebaut and definitely very interested to go. And it's definitely our plan to keep our current customers and our new customers.

Okay. Final question for you, Peter. You mentioned you want to expand along this value-added letter. Can you give us some concrete examples? Because in my understanding, Barry Callebaut has been very innovative in the past. So where do you see here the opportunities? Do you have to spend more money on R&D going forward? Or do you reallocate resources? Or how do we should imagine that?

As shared in the presentation, we believe there are various levers for accelerating up the value lever. Innovation absolutely is one of them. And I believe by being customer focused, by diving deeper into the needs of those customers, I think we can still sell much more of those innovations than we ever have done in the past. So in that sense, that's acceleration. As you all know, ESG sustainability is very, very important. So we believe with our sustainability solutions, we're able to add value to our customers as well. But the oldest lever of our strategy is cost leadership. And I still believe also even through cost leadership in these times where a lot of our customers are challenged, we can add value. So accelerating up the value ladder is really about adding value to our customer relationships. You know we have an enormous reach. We sit with a lot of customers in need of chocolate around the world, adding value through innovations, through sustainability, through cost leadership, but even leveraging our global footprint, I think there are still -- we are only scratching the surface and there's still much more that we can do than we do today.

Jean-Philippe Bertschy, Vontobel. And welcome to the financial community. The first one is on where do you want to put your priorities? You repeated a couple of times today, the smart growth strategy. You are running the Americas quite successfully. I think South America was really a huge success last year. If you can share with us where you want to put your priorities and maybe to share some best practices with the rest of the business. The same probably with regard to sustainability, where you want to accelerate, we saw some companies in the consumer goods industry, which accelerated their sustainability plan and kind of target a bit earlier than before. And the last one, I saw some headlines this morning that you won 3,000 clients. I think that's right. If that's accurate where was that probably in which divisions? Was that new contracts, new autos contracts, so you gain market share? And maybe as well in terms of tonnes, what does that represent?

Okay. Let me -- thanks, Jean-Philippe. So let me start by learnings for -- from the Americas. But please be reassured that is well reflected, of course, in the strategy we are driving together. And we are a big company, but we are small enough to share learnings. My experience in leading the Americas is exactly as we described here. We are a growth company. So we have always been very focused on our customers, very active on the front line empowering our frontline people to come up with new opportunities. We have been selective in which one in the end, to sign up for, to really to drive the mix because it's the easiest way to deliver our midterm guidance. If you find the growth and drive it with the right kind of mix, is the best way to get to the guidance. And then I think we spent a lot on execution with our growing business, and I always say my mother told me one thing. And Peter, if you promise something, please do it. And that's at the heart of Barry Callebaut. We are a business-to-business company. So with our growing business, it's very important that we deliver on our promises. So go after the growth, do it in a smart way, but also be ready to execute against it because we cannot disappoint the customers out there. That's the first question. On sustainability, we see, of course, an enormous interest, but that's not that we have started this journey yesterday. I'm very proud that in 2016, I started and I launched Forever Chocolate. I started that journey before even Antoine joined us because we felt we need to show as a leader in our industry, we need to show that we can grow in a profitable way. We can really be very successful, but still have a positive impact on the world around us. That's why we launched very impact-focused time-bound targets forever chocolate. And those targets are still front and center in our strategy. So we drive against our own impact,, and we will keep doing that. Very important, of course, is to also get our customers engaged and onboard because we always said we can't do it enough alone. We need our suppliers, we need the governments, and we absolutely need our customers. And what I'm very happy with is that we see a lot of customers just ramping up their programs, spending much more time with us to find the right solutions, and it's up to us as a leader to guide them in the right direction. But the impact we are after in the end is captured well in Forever Chocolate. And on the third of December, we report back on our progress there. And then on the 3,000 customers. I think we just highlighted a little bit. It's 3,000 customers in for our Gourmet business. This has also happened, let's be clear, for other parts of our business. Yes, it was done in an agile way. So if I'm proud looking at the business performance in Americas, we were pretty quick to accept where the decline of the business came and then to complement it with new customers, with new segments. And of course, we are learning from some of those customers. There could be customers, there could be some segments where we say, "Hey, this is not exactly where we should be." But in general, what surprised me, and that's in all kind of ways throughout our business, we have become a stronger business out of this pandemic. We have identified new opportunities, which we were too busy to -- with our existing business to really pay enough attention to. And we see now that the business we have added. I'm comfortable that a majority of that business we will sustain. And with the traditional kind of distribution channels opening up again, that will keep accelerating our growth.

If I just might add to that point as well. We were, of course, helped by our digital tools. If the crisis COVID pandemic would have happened 10 years ago, 15 years ago, it would have been much more difficult to find new customers. But now we're using Salesforce platform. We have our digital sales platforms. We have our digital collaborations with our clients, with our chefs and so on as well. And that has helped to find new customers as well.

Yes. And I always say to my team -- on the one hand, as a moment to be proud of, but also to as a moment just to see the potential. I say we are at most in 1 out of 4 chocolates in the world. There's something, of course, to be proud of because that's a lot of chocolate, but it's also showing the head space. Yes, we want to develop the markets. We want to develop the markets in value, but there's also still a lot of share we can gain.

We are also having questions from the phone lines. Operator, if you can please put them through.

The first question comes from Jon Cox from Kepler.

Apologies I can't be there. Congratulations on a decent print there. And I think your comments on maintaining the targets and the sort of focus on smart growth is very reassuring for the market. And obviously, that can be seen in the stock price. A couple of questions for you. Just on sustainability. I know you had a net zero or a carbon-neutral goal by 2025. That's obviously much better than a lot of your peers out there talking about 2050. Just wondering where you are on that? Are you still relatively confident it will be somewhat your land on that around 2025 because I think that would be a fantastic achievement and very important for investors and obviously for your customers. Second question, just on Gourmet. You mentioned this 3,000 figure. Just wondering what your total gourmet client base is. Is it like 50,000 or 100,000? Just to give us a bit of feeling for what you've had it. And the last question, just to roll back into what one of my colleagues were saying, how much do you think of your pre-COVID business has gone or is down? Is it something like 10% is still down and you've made that up with new customers, and you would expect that 10% to come back as things normalize, which obviously would give you some great tailwinds going into FY 2022 and FY 2023? Thanks very much.

Thank you. So yes, as I said, on the 3rd of December, we gave an update on our Forever Chocolate plan, so the progress report. As just shared in this presentation, we have reduced carbon intensity with 17%, which is a significant and much better than seen by others. That's also why CDP gave us a top ranking for the third year in a row on that aspect. We have a plan to hit our numbers. Of course, we have an enormous exposure to land, which offers opportunities, but also gets its challenges. And I will -- I think we are working against our targets. The beauty of Forever Chocolate is that we set targets, which made us all nervous, but leaves a lot of creativity. It creates at least a lot of IDs, which really make us on most fronts just making great progress. But more detail on that front on the 3rd of December, we are excited to share then really the various data points of our progress. How many customers, Ben?

Jon, I cannot answer that part also, I don't have the data with me. But overall, as you know, our Gourmet business is a business of artisans. It's a business of food service. It is a business of small- and medium-sized companies. So it is a large pool of clients, and it's very important as well in different segments. It's not only in HoReCa. Yes, HoReCa hotels, restaurants are important, but it's wider than that, it's bakeries, pastries as well. So I will not comment on the specifics on how much is still there because I simply don't have that exact number available.

Yes. And just on the impact, you have seen the impact of the pandemic on our Gourmet business last year and through our numbers. There are certain segments which have been heavily impacted. For example, in my Americas business, the cruise liners, that's not a good business or that was not a great business to be in. There's a little bit of sun on the horizon, and there are more travel, of course, out of home. My assumption is that the markets will come back, whether it's exactly through the same customers, that's a question, but the markets will come back because we see the consumption of chocolate just sustaining itself pretty well, even growing. And therefore, we believe that the coming back of distribution channels will be a big kind of a growth driver behind our business in the years to come.

And you can't give us a figure of how much you think is still missing from that pre-COVID client base or customer base?

Yes. You know me, Jon, I'm not guessing. So it's very difficult, and it is also depending a little bit on different geographies, depends on -- Asia is a little bit different now with some more difficult times in Southeast Asia. Europe is already -- was already reopening. Now we have quite a bit more restrictions coming up. So I'm not going to guess at this point, Jon.

But there is upside in there, look at our own travel agendas. Now Asia now starts to open up, but that's still a region which has been heavily in lockdown, and therefore, also will show potential in the months to come when they open up.

Next question comes from Lauren Molyneux from Citi.

So I just wanted to go back to -- on one of your slides, you have the gross profit bridge. And you mentioned that there was mix contribution from both G&S and also you're seeing more value out from Industrial customers. I was just wondering if you could give us an estimate of sort of the split between these 2 in terms of contribution to growth. And then maybe also on that value outside from the industrial business, where are you seeing this appetite coming from in terms of customers? Is it more the larger customers or the smaller customers that are focusing on this? And then my second question is around your expectations for your commodities into next year. I know there's already been a question or 2 on this, but just wondering how we should think about telco and some of the other soft commodities developing into next year?

Thanks, Lauren. So first of all, on the gross profit bridge, as you pointed out, of course, we're growing in terms of volume, but the mix is very important. And no surprise there, it's a mix because of Gourmet growing strongly again. So there's -- but also within the FM business, as I pointed out, we're also growing their overall margins because we have been looking at more premium products there as well. The cocoa side, yes, the overall volume was down, but it was compensated by focusing much more on the premium Cocoa Products, the Cocoa Products that we're selling under the Bensdorp brand. We have -- we had some interesting launches with an all-natural dark cocoa powder as well. So that's part of the mix activities that we're doing as a company. On your second question, maybe you can add.

Maybe I can take that one. You take the last one again. So interest in the value-added. Yes, we segment our customer base as well. So absolutely, there are customers out there will just want to have a price discussion for the cocoa powder or the chocolate. But in general, the demand on our customers on innovation, on sustainability, are not getting less. That whole kind of trend of mindful indulgence. So indulgence is, of course, always here to stay. But yes, they care more about their environment. They care more about their own health and our customers need solutions for that. And therefore, we see a rate and the pace of innovation increasing. Still, some of our customers would say, "Hey, we can do it ourselves, but we see a lot of customers reaching out to help, to ask our help. And therefore, we are comfortable, we are able to add value to a significant amount of them."

Thank you. very good. So on expectations in terms of commodity, let me touch base on cocoa where, of course, that's our core business where we know the most of -- I'm not an expert overall in forward looking statements on sugars or dairy. But in cocoa, there is -- there was a surplus. So we had a very good sort of a technical crop. We had a good supply of cocoa beans. So I don't know the latest estimate, but it was something around 100,000 tonnes surplus this year. So of course, there is going to be a little bit of an overhang in the next coming year. We expect the next year to be much more balanced. So we don't expect a huge surplus coming out of the cocoa beans because, of course, coming out of COVID-19 as well, the consumption has normalized now as well. So it is much more balanced, but also not negative, which is good news for us.

The next question comes from Andreas von Arx from Baader.

I'll start with a housekeeping question. The increase in corporate and unallocated EBIT to above CHF 100 million. Is this a bit more onetime? Or is that a sustainable increase? That's my first question. Second question is on your outsourcing growth that you show in your presentation. I mean, this has been 4.5% for the full year, but 5.5% for 9 months and 1.8% for the first half. So roughly, this gives you 1% to 2% growth in the fourth quarter and more than 10% growth for the third quarter. The question here is, is this just a quarterly shift we can see as a normal business. Or what do you see as your current underlying growth rate in the outsourcing business? And then finally, a question for Peter Boone. Maybe I would like to get a bit more meat on the bone on your smart growth strategy and your priorities to execute that. I mean maybe to provoke you a bit what you told did sound a lot like what we heard before and not a lot really new stuff. So I would like to know to what extent is the Peter Boone Barry Callebaut about acting differently going forward as compared to the Saint-Affrique Barry Callebaut we have seen in the past? What are the key projects you have been outlined to the Board and employees to keep your employees motivated and excited in terms of delivering on that smart growth strategy?

Andreas, if I may because I didn't quite understand your first question. What are you referring to on the EBIT side?

Yes. On the EBIT side, you have the EBIT per division and then you have a corporate unallocated negative amount, which is a bit more than EUR 100 million and which has been below EUR 100 million the year before. So there's an increase of EUR 6 million to EUR 7 million, mainly in the second half, nothing one-off?

No, there's not one-offs. So of course, we also have -- we have a corporative division. So we have a regional view, and then we have our corporate costs as well. Fair to say that the corporate cost has increased. But of course, also, we are doing more corporate activities as well. We are doing also more corporate marketing activities in terms of research and development as well. I think we're at a good level now. It's nothing extraordinary, but there's also not one-offs there that is not going to return back the following year. So it's an overall quite solid and well-controlled corporate cost structures that we have as a company our size. Now on the outlook. So Andreas, I cannot give you specifics quarter-to-quarter, that would not be wise to do. So we give a midterm guidance. We are very confident in the outlook there as an executive team, together with Peter. We know the opportunities are out there. So there is no lack of opportunities out there. Me as CFO, we always look together with the finance community and the business, of course, at the right trade-offs. So not every business, as Peter was saying, is attractive to us as well. It would not be wise for us to suddenly change our overall view in terms of growth, also a little bit linked to the outsourcing part as well. And first of all, it's a 01 game, where it's very difficult to predict, but we are also very diligent about it. It's not -- it needs to be a win-win. It needs to be a win for Barry Callebaut. It needs to be a win for our client as well. So it's not just going blindly after volume growth. So that's why we are very confident that our 5% to 7% overall growth and acceleration on the EBIT side is the right approach for us. And we will always carefully look at every opportunity.

All right. And then I probably have to take the third question. Thank you, Andreas. So let's start by saying that I'm 9 years with Barry Callebaut have seen different parts of our business have been Chief Innovation Officer. Have been leading the sustainability and crafting our agenda on sustainability, have led quality have seen the factories and then had 4 years leading the Americas. So I have been always been part of the executive team. And it's not just a CEO. It's always a leadership team, together with the full organization that sets the strategy and execute that on a day-to-day basis. Personally, Peter, I've seen, yes, all corners of the world in my career, I've seen different functions, but I'm a marketeer at heart. I'm always out there. I love our customer focus. I love to look at the markets to see where the trends are going for the future. In that sense, I see a lot of opportunities and bring at least that positive outlook to our colleagues and to our employees. Second, that's in line with Antoine. I'm also fully endorsing our ambition on the sustainability front. There, you will see me driving the agenda as hard as Antoine has been doing. So in general, what's different. Change is not always better. I think if you have a very successful strategy, which delivers then please keep executing. That's where we focus on executing our strategy very well and, of course, preparing ourselves from adding more value to our customers because our customers want to see more of ourselves. If you talk with our customers, they appreciate Barry Callebaut, they love Barry Callebaut, not only for just the chocolates we provide but really for the expertise we bring to the table for the innovations. And I think we can definitely do more and bring all that expertise, all that knowledge and excellent products. to our customers. And there, of course, my experience on the ground as a President being day-to-day with our customers, I think will bring a lot to help inspire the organization.

The next question comes from Alex Sloane from Barclays.

Apologies. I can't be with you in person. A couple of questions from my side. Just on the Global Cocoa business. In the statement, you referred to an EBIT per tonne growth in the absence of some of the impacts from higher energy and freight costs. I wonder if we can infer from that, that you see those costs as largely one-off? Or should we be expecting them to continue in the next year? That would be the first question. And the second question, I mean, just in terms of the food manufacturer business, I think the height of the pandemic, you had called out some margin mix pressure in that business as kind of smaller customers, we're losing some share relative to multinationals. I wonder has that trend reversed? Or do you expect that to continue to reverse? And could that be a margin tailwind for you over the next few years?

Let me take the first question. Indeed, Alex, thanks for your question, Josh, you're referring to what we disclosed in the presentation here. that we -- in cocoa, we were hit by higher energy costs and by logistical pressure. First of all, on the energy part, it was for a specific reason. We had to be operating a large grinding operation in West Africa. And over the summer, we didn't have enough electricity. So we -- good thing is that we are prepared for these things. It's not the first time it happens. And also that's why we didn't put it as a nonrecurring item because things happen when you operate in origin countries. Luckily, we have generators to keep our production going. So one, there was no electricity, we were able to continue our operation, making sure that our clients were served that we had continuity, but it came at a cost, running your factory on generators cost you more than running it on electricity. That's what we want to highlight. Will it not happen again in the future in the next 2 years? I don't know at this point, but it was important to put that extra highlight. On the freight cost itself, I would say it's -- if you would have asked me 6 months ago, I would have said we're already out of it by now. But I'm sure every CFO will say the same. Yes, it is here to stay longer. In the meantime, also in our cocoa business, we are pricing it into our contracts, in our cost plus. So it's not that it's -- that we were not able to pass it on, but it has a delayed effect as well. So -- because typically, we are in a forward business there. But it is very difficult to judge what's going to happen in the future on the logistical side. But I want to stress something. And this is very important that I say this because during all the price issues but also the supply issues and containers being misplaced, we always have been able to supply our clients. And that is worth a lot of money as well in the future. When you can show as a global supplier with your global footprint, that in times of crisis, in times of pressure that you can supply, that's worth something for our clients in the future.

No, absolutely. And it's amazing to see when a team gets challenged, what kind of solutions they come up with. So yes, you see a little bit more stress in the face of coffee machine, of those working in logistics, transport, but they come to solutions. And I just picked up last week and that's from the very little town, I'm from in Holland [indiscernible]. We just chartered a boat, which was going to bring products from [indiscernible] to the Americas. So they're all kind of new solutions we find also in this space. But most important, we get our products out there. We get our products to our factories so that we can produce, and we get our products in the end to our customers. So a lot of customers will reach out to us to ask our help just to support them in that area. Then on FM, I always say the luxury I've worked 7 years of my life in Unilever. So I was betting on one horse. The beauty of Barry Callebaut is that we are active along the whole spectrum of the smallest customer out there in the high street to the biggest one. And yes, we saw in the pandemic that some consumers responded, consumers respond to uncertainty by getting back to what they trust the most and that were the big brands. So you saw a big brands coming up. You saw also trends which catered a little bit better to the big players. So for example, in my market, the U.S., everyone got crazy in baking chocolate cookies. So there was a lot of chocolate chips which were sold. You see those trends now reversing again. So still, a lot of the big companies keep strong positions, but we also see a lot of smaller ones again gaining pace. So up to us to keep up with that, that's the agile company want to be. We want to be there from the smallest to the biggest. And therefore, we will see in the end we will be in the market.

The last question for today comes from John Ennis Goldman Sachs.

Just a couple of follow-ups for me. My first is on the EBIT per tonne outlook. Your EBIT per tonne is around CHF 20 lower than the pre-COVID levels, which has already been referenced today. But I guess, what would stop you correcting that gap in FY '22, if any, maybe you could give us a bit of a time frame with regards to the recovery there? And then my second question is just to come back on the sustainability plans. As it's been referenced, you still have a reasonable way to go in order to reach some of your targets there. I appreciate that you'll be coming back on this topic in December, but can you give us some of the key headlines behind the big initiatives to close these gaps. And Peter, given that you set up the Forever Chocolate road map, if you think back to when you laid out the plans in 2016, are we where you would have expected to be by 2020, 2021 versus the initial road map? Or are we ahead? Are we below? A bit of color there would be helpful.

Let me start. Thanks, John. So on EBIT per metric tonne, again, I want to reiterate, of course, that is a translation impact as well over the 2 years period, not only over a 1-year period. But it's fair to say that we are still a little bit behind as well. We strongly expect EBIT per metric tonne to go up as that's, of course, our midterm guidance that we have and that we can definitely accelerate as Peter was saying, along the value ladder. I'm not going to go into specific quarters as well, but I heard us as well. Gourmet is back on track. Gourmet is back into growth mode and it's an important contributor to overall EBIT per metric tonne as well. And that's a little bit -- what I was talking about the 3 divisions are important, but this is important that Gourmet keeps on growing faster than FM is growing faster than Cocoa. And that's how you should look at the overall profitability between per metric tonne between the different business units. But again, not saying that our focus should only be on Gourmet at the same time because also Gourmet -- beyond the things I already said earlier, Gourmet needs the footprint of FM. That's also the beauty when we go into certain markets when we grow in China, for example, because I spent quite a bit of my time in Asia Pacific. You need to have a footprint. You need to be close to the market and you need to have feet on the ground. And you do that typically with FM customers, and you use that to manufacture gourmet products in a very efficient way as well and reaping the benefits in EBIT per metric tonne by having those combinations.

And on sustainability, yes. So in 2016, when we sat down and said what to do in this area. Of course, we brought quite some Unilever experience to the table also where we learned that you have to set ambitious targets, targets which makes you nervous because the solutions we need to really be a positive impact on the world around us need to be quite radically different. We also said we cannot do everything. So we were very focused in 4 areas. And we said right away, we are going to report on this very openly because there must be areas, where we are going to make great progress, but there must also be areas where we struggle and where we will see maybe a gap rising. At this moment, that's too early. The targets are still out there. We are still looking at the and working on them every day to close the gap. You will hear on the 3rd of December, our progress, very proud on our progress on carbon, very proud on our work with farmers, very proud on the sourcing of our sustainable ingredients. So there's a lot to be proud on and a lot of areas and a lot of work still to be done, but we luckily have a couple of years to do so.

There are no more questions in the queue. Please go ahead.

So thank you all for being here today with us in Zurich live and also on the webcast. For those who have pleasure to be here, and we've invited you and have some of the chocolate and the latest innovation to taste. But thank you very much for joining us at the conference today. And if there are any further questions, please reach out to us. Thank you.

Thank you.

Thank you.