Barry Callebaut AG (BARN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Due to an unforeseen event, our full year results for the fiscal year '21, '22 have become publicly available already today, which is why we have rescheduled this conference -- analyst and media conference at short notice. Thank you very much for your understanding. And also for those that couldn't make it to the venue today, we will make sure that you will not be short of chocolate after the event. As usual, speaking to you today are 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'd like to inform you that the webcast is being recorded. This is the agenda for today. As usual, Peter will start with the highlights of the fiscal year, followed by the detailed results, financial results presented by Ben. And Peter will finish off with the strategy and outlook before we open up the channels for your questions. You will get once more instructions by the operator at the end of the call. And with that, I hand over to Peter.

Thank you, Claudia. Dear ladies and gentlemen, welcome to our full year 2021, 2022. We are looking back to an exciting and eventful year. Overall, we are happy to share a broad range of cocoa and chocolate highlights. For those present in the room, we have some of these highlights here for you to taste after the conference. Let's have a look at how we performed. I'm proud to present a strong set of results for the full year with strong sales volume growth, clearly improved recurring profitability and continued good cash generation. Sales volume increased by 5.3%, driven by the chocolate business and Gourmet & Specialties, in particular. The growth was also supported by all regions. Recurring operating profitability increased strongly with 13.5% in local currencies and so did the recurring net profit for the year with 14.1% in local currencies. We continued our good cash generation with adjusted free cash flow of CHF 358.5 million. Ben will share with you the financial results in more detail. But before that, let me continue with some highlights of the year. Now let's start with the highlights on this familiar chart showing the volume growth per quarter for cocoa and chocolate. We were on a very, very strong growth trajectory in the first 9 months, which was impacted by the Wieze incident in the fourth quarter. Despite this, we still achieved a strong volume growth of 5.3%, and mainly driven by a strong chocolate performance of 5.9%. This is well ahead of the flat underlying chocolate confectionery market according to Nielsen. Volume growth of Global Cocoa was back at normalized levels, 2.5%. And let's have a closer look at our key growth drivers. All key growth drivers contributed, in particular, Gourmet & Specialties showed a strong increase of 22.5%. We are, of course, very excited that the growth of Gourmet & Specialties is broad-based. Emerging markets also showed solid high single-digit growth, thanks to key markets, such as China and India. But also South American markets like Chile and Argentina. In outsourcing and long-term partnerships, we added over 36,000 additional tonnes, an increase of 4.8%. Asset. We had an eventful year. And this slide gives you an overview of some of our most important milestones. To mention a few, we celebrated the groundbreaking of a new factory in Ontario, Canada, which will focus on sugar-free, high-protein chocolate products for North America. We extended strategic supply agreements with Hershey and Bimbo and entered a long-term distribution agreement with Levapan to drive expansion in Latin America. The opening of the Chocolate Box, our global distribution center in Lokeren was an important investment to improve our global distribution and leverage the benefits of our scale. We signed a partnership with distributor and manufacturer, Attelli, which established our first chocolate production footprint in Morocco and consequently, on the African continent. We also opened a CHOCOLATE ACADEMY Center in Morocco and in Shanghai. So growing the network now to 26 CHOCOLATE ACADEMIES around the globe. All in all, a lot of events, we can be very, very proud of. I'm very happy also that we could share 2 weeks ago that the world's largest chocolate factory is running again at its normal capacity. I want to express my deepest gratitude to all our colleagues who worked tirelessly over weeks to get the Wieze factory up and running again. In addition, I want to thank our customers for their understanding and cooperation in this difficult period. The speed with which we identified the root cause of the contamination and started the cleaning process, clearly showed that our continued focus and investment in food safety and quality are paying off. And speaking about being proud, just look at these amazing and tasty solutions, we are all offering our customers. We drive on trend innovation. So it's a mindful intelligence through our expertise on dairy free, chocolate and whole food chocolate. And we keep setting the benchmark on chocolate innovation. Just last week, we launched the second generation of chocolate, which is made of only 2 ingredients for dark or 3 ingredients for milk chocolate, putting cocoa first, sugar last on the label. The distinct flavor characteristics of the cocoa bean cultivated during farming and awaken during the fermentation and roasting process are fundamental to this new chocolate. And with this, I hand over to Ben to share with you our financial results in more detail. Ben, the stage is yours.

Thank you, Peter. Dear ladies and gentlemen, it is my pleasure to go through our financial results for you. First, let me explain to you the reported part of our full year results because in the slides thereafter, I will mainly focus on the recurring results. The reconciliation from recurring to reported results contains 3 blocks. As already disclosed in the half year results, we had a positive impact of CHF 13.5 million from the recovery of the indirect tax credits in Brazil. As indicated in the 9 months' sales update in July, the salmonella incident in the Wieze factory had a notable financial impact of minus CHF 76.9 million. This net one-off impact includes the estimated cost of fulfilling contractual obligations, the cost of cleaning, destruction and transportation net of insurance. The direct loss volume and related profits are included in the reported results. And lastly, the closure of our chocolate factory in Moreton in the U.K. led to a cost of CHF 7.8 million. In summary, the 3 nonrecurring items amounted to minus CHF 71.2 million on the operating results, leading to an EBIT reported of CHF 553.5 million versus a recurring of CHF 624.7 million impacting mainly region EMEA and due to the Brazilian tax recovery Region Americas and Global Cocoa. On net profit, the nonrecurring impact was slightly less due to an additional positive financial income on the Brazilian tax recovery amounts. In the following slides, I will focus on the recurring numbers. Now let me go back to the key figures on Slide 14. As highlighted by Peter, we achieved strong volume growth of 5.3%. This growth was broad-based across all regions and product groups, and it was smart growth, driving profit up with further improved mix. EBIT recurring increased by 13.5% in local currencies or 10.2% in Swiss francs, more than 2x the volume growth. Recurring net profit for the year amounted to CHF 428.5 million, up 14.1% in local currencies, 11.4% in Swiss francs. Last but not least, we saw continued solid cash flow generation of CHF 266.2 million and adjusted for readily marketable inventories even at CHF 358.5 million. We will go into more details in the coming slides. But first, let's take a look at the performance by region. All regions contributed to the strong volume increase, clearly outgrowing the underlying regional confectionery markets. Region EMEA was on track to achieve very strong results until the Wieze incident happened. Despite the notable impact on the fourth quarter, a healthy volume growth of 4.3% was achieved, well ahead of the declining underlying markets according to Nielsen. And bringing the total volumes for the first time ever above 1 million tonnes. Following a gradual ramp-up, the Wieze factory has been on track to normal capacity since the end of October. The incident had, in particular, an impact on the food manufacturers volume growth in Western Europe, affecting its healthy growth thus far. The Gourmet & Specialties business was not immediately impacted by the incident and continued its strong growth trajectory. The operating profit EBIT reported was down minus 15.6% in local currencies. Excluding the nonrecurring impact linked to Wieze, and the cost of the closure of the chocolate factory in Moreton, EBIT recurring grew more than 2x the volume growth at 10.5% in local currencies, reflecting a positive mix and effective cost control. Region Americas exemplary showed strong smart growth, leading to double-digit EBIT increase. Sales volume reached a record level of close to 650,000 tonnes, up 6.4%, clearly outpacing the regional underlying chocolate confectionary market. This was achieved thanks to the food manufacturers volume growth that was broad-based and supported by ongoing trends for better-for-you products. Gourmet & Specialties continued strong volume growth from north to south. This strong smart growth in both segments translated into double-digit recurring EBIT increase of 14.8% in local currencies. In Region Asia Pacific, the strong growth momentum continued, reaching 15.8%, clearly outpacing the underlying market. Despite the high comparison base, the Gourmet & Specialties continued its strong growth. Food manufacturers continue to show strong growth in key markets such as India and China, while some markets like Australia lag behind. Operating profit recurring grew by 2.9% in local currencies. EBIT growth was behind volume, mainly due to the upfront investments for growth in Australia. Nevertheless, the region's profitability per tonne remains well ahead of the group's average. Our Global Cocoa business showed a rebound in profitability as expected. This is reflected in the increase of 7.5% in EBIT recurring in local currencies. The reported EBIT includes the positive effect from the recovery of indirect tax credits in Brazil. Now let's go back to the group level and have a look at the gross profit bridge. The strong benefits of volume growth was combined with a positive mix impact, reflecting the strong growth in Gourmet & Specialties and the group's solid cost-plus model. The contribution from cocoa business turned positive in the second half of the year as expected. Overall, gross profit increased by 8.4% in local currencies ahead of volume growth. Please note that the currencies had a strong negative effect of minus CHF 26 million. The cocoa combined ratio shows the relationship between the market price 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. Having said that, cocoa combined ratio slightly improved to 3.6x compared to 3.5x in prior year. This was the result of steadily rising cocoa powder prices, while cocoa butter prices still suffered from the ripple effects of COVID-19. Only towards the end of the fiscal year, cocoa butter price started to increase, thanks to strong chocolate consumption in Europe and in the U.S. The global bean supply and demand expectations for crop year '22 indicate deficit. However, large stocks carried from the prior year surpluses allow for sufficient supply, which should lead to an overall balance situation. Next, let's look at the operating profit bridge for this fiscal year on Slide 18. Our EBIT recurring improved strongly, up 13.5% in local currencies. As just explained, gross profit contributed an additional CHF 96 million. SG&A and others increased by CHF 20 million due to the resumption of investments in business growth in order to promote the group's product innovations and CHOCOLATE ACADEMY centers. However, this increase was overall in line with volume growth. Currencies had a strong negative impact of minus CHF 18 million, leading to an EBIT recurring of CHF 624.7 million. Our next slide shows you the development from EBITDA to net profit for the full year. Financial items increased to CHF 122 million due to materially increasing interest benchmark rates. The partial prepayment of the Schuldscheindarlehen in February 22 mitigated this effect somewhat. Income taxes, tax expenses decreased to CHF 70.8 million from CHF 80.5 million in the prior year, resulting from a lower profit before income tax and somewhat more favorable country mix as well. This corresponds to an effective tax rate of 16.4%. The net profit recurring increased by 14.1% in local currencies. On Slide 20, we show the long-term development of key raw materials. Thanks to our cost-plus model used in the majority of our business, the volatility of the raw material prices and other manufacturing costs normally does not affect our profitability. However, it does have an impact on our working capital. The cocoa bean price closed at GBP 1,878 per ton on August 31, 2022, on average, an increase of 4.2% versus prior year, far less than any other soft commodity and based upon fundamentals. The world market for sugar increased by average 18.7%. This was due to a substantially lower Brazilian crop and the market environment impacted by high energy prices and geopolitical uncertainties. Sugar prices in Europe increased on average 56.4% during the fiscal year. Robust demand was confronted with low supply due to reduced acreage and dry weather. The additional surge in energy costs contributed to the strong price increase. The dairy price increased on average 51.5% during the fiscal year. Increasing demand coupled with substantial decline in milk supply, driven by the drought in the northern hemisphere and input inflation due to the war in Ukraine pushed dairy prices to historical highs. I'm very pleased with the continued solid cash generation, which has resulted in a strong adjusted free cash flow of CHF 359 million. Let me explain to you how we achieved this. Working capital decreased by CHF 63 million. Receivables increased on the back of our business growth, but good inventory management largely mitigated the impact of higher raw material prices. However, different seasonal sourcing patterns and the temporary stoppage in Wieze led to an increase in cocoa beans and other raw materials inventory. Both impacts were largely offset by higher payables. Interest and income taxes paid amounted to CHF 184 million. The increase is mainly due to higher benchmark interest rates while taxes were lower. We continue to invest in our capabilities that enable future growth and our capital expenditure of CHF 276 million was around the same level as we had in prior year. The reported free cash flow amounted to CHF 266 million as the effect of cocoa beans regarded as RMI was negative this year compared to last year. The net debt further decreased by CHF 82 million. Considering the cocoa beans in inventory as RMI, the adjusted net debt decreased with CHF 198 million to CHF 350 million at the end of August 2022. The portion of debt related to IFRS 16 leases remains about stable at CHF 265 million. Now we're coming to the end of the financial review. Looking at our balance sheet and related ratios on Slide 23. Our net working capital slightly increased to CHF 1,293 million on the back of business growth. Our recurring ROIC and ROE increased with 100 basis points to 13.2% and 50 basis points to 14.8% on the back of improved mix reflected in the higher EBIT recurring. As mentioned on the slide before, the adjusted net debt decreased further, leading to a low adjusted net debt-to-EBITDA ratio of 0.6x. Last but not least, let me talk about dividends. The Board of Directors will propose to the Annual General Meeting of Shareholders a stable dividend of CHF 28 per share. This corresponds to a payout ratio of 43% of the reported net profit for once above the targeted ratio of 35% to 40% due to the aforementioned one-off impacts on the net profits. This year's shareholder meeting will be held on December 14, and it will be again with personal attendance of all the shareholders. And with that, I hand over to Peter.

Thank you, Ben. Let me now share with you some words on our long-term strategy and how we want to continue to accelerate of the value later. As you know, we have been and will remain very consistent in our long-term strategy. We will continue to drive growth on the sound foundation of our 4 strategic pillars: expansion, innovation, cost leadership and sustainability. Focus will be on smart execution, returns and cash generation. I see opportunities to further leverage our footprint across the globe from developed to emerging markets. We just established our first chocolate production footprint on the African continent, are building a factory in Canada to cater to fundamental trends and also as a leader on innovation, push boundaries, for example, with the second generation of chocolate, we just unveiled. Through scale, leverage and efficiency along the value chain, we will continue to create cost leadership. Our new business excellence center in Malaysia is a prime example of how we want to achieve this. I was very pleased to see that our efforts are recognized by the financial markets, S&P upgraded our credit rating to BBB flat and outlook stable. Through our industry-leading approach to sustainability, we continue to create tangible impact on the ground. With the support of our customers, we increased the proportion of sustainable products sold. Every 1 out of 2 products we sell contains 100% sustainable cocoa or chocolate. Our goal of making sustainable chocolate in home is truly becoming a reality. In early December, we will publish our Forever Chocolate progress report. And later in the fiscal year, we will publish our sharpened Forever Chocolate targets. So stay tuned for more to come. Ladies and gentlemen, as many of you are well aware, ESG is the standard on reporting on the nonfinancial risks in supply chains. Barry Callebaut is dedicated to running all our operations with transparency and integrity, including reporting on ESG policies and risks. And I'm proud that our efforts in sustainability, again, received external recognition. Sustainalytics ranked us #1 among close to 600 companies in the food and beverage industry for our management of ESG supply chain risk. At Board level, I'm happy to announce that Thomas Intrator will be put forward as a new member of the Board at the next AGM. Thomas is a Swiss National who has built his experience during his distinguished career at Cargill and brings deep expertise in the areas of energy, logistics, trading and risk management. All current members of the Board will stand for reelection for another term of office of 1 year. Ladies and gentlemen, to conclude, supported by the consistency of the growth strategy and the strength of the innovation pipeline, we are on track to achieve the midterm guidance in fiscal year 2022, 2023. As you know, our midterm guidance is 5% to 7% volume growth and EBIT above volume growth in local currency, bearing any major unforeseeable events. In Q1 of this fiscal year, we will give an update on our new midterm guidance. And with this, ladies and gentlemen, I conclude this presentation and would like to open up the floor for questions. Operator, could you please instruct the participants accordingly? Thank you.

[Operator Instructions] The first question comes from John Ennis from Goldman Sachs.

My first one is on the Wieze site closure. I guess, could you provide a bit more detail on how you've calculated the provisions you've booked within that CHF 77 million one-off? And how confident you are that there will be no need for further one-offs to be booked in 2023 in relation to that closure? And maybe give us a bit of a sense on what the customer reaction has been and how your ongoing relationships are there? That's my first one. And then my second one is a bit of a confirmation actually. You say that you're going to give an update on the new medium term guidance with the 3-month sales release. Just clarification on exactly what you mean by that? I assume you're going to give a new set of guidance post 2023, but I just want to confirm what you mean by that update? And then my last question is on the EBIT margin performance in Asia Pac in the second half. It fell by around 250 bps year-on-year. And you mentioned some investments being made, but can you detail what those investments are? Exactly, how much of a contribution they were to the margin reduction? And maybe in that context, to what degree was gourmets performance in the second half for that region also a contributor to the margin reduction?

Okay. Let me first start on the Wieze impact on the overall net one-off costs. So we have a CHF 76.9 million. So it includes, first of all, the transportation, storage and destruction and disposal of the contaminated products. But of course, also cleaning costs, including dissembling and putting odd lines back together. Then you have a portion of it related to contractual obligations that we have with customers as well. As you can imagine, good news was that we were able to capture the products before they entered into any consumer markets but some of our customers were affected as well. So of course, we have their contractual obligations as well related to customer agreements. We have done a clear and complete assessment of the total impact. And to our best of our knowledge, we have captured all the nonrecurring items in the last fiscal year. This was based upon a full detailed analysis behind the total number. Yes, of course, there's 1 number that we put out there, but rest assured is overall a lot of thought and a lot of details behind it as well. And we feel confident that we have to best of our knowledge, we have captured all of it in last year's nonrecurring results.

Maybe I can then take over, Ben, and reflect on the customers because hey, of course, it had an impact on them. But the first reaction, we absolutely have received from customers is an appreciation of the systems in which we identified the issue. Contamination of our line in a factory in Wieze. The swiftness of the communication. So informing them and therefore, not any product has reached the retail market in the end, which, of course, just speaks to the food quality systems we have in place to identify this. Still, we know that for a lot of the customers, they need, of course, product and they need it out of Belgium. And in that sense, they were, of course, in need. And up till today, we still try to catch up on these volumes. We have been really impressed in how cooperative they have been. We have really been impressed of how well they have tried to work together with us to find a way out. In liquid, I think we see the end of the tension on delivery being closed. On Gourmet, of course, we have still a little bit of pipeline to fill and that we will do over the next couple of weeks. Then on the midterm guidance, hey, we will close the 3-year midterm guidance we have given 2 years ago in this fiscal year. So we are still focused, and I'm confirming that we will deliver on the midterm guidance, so that is positive news. We also, however, understand that it's interesting for you to hear what the new midterm guidance is. And therefore, we don't want to wait longer than at the end of the first quarter, when we share with you the volume growth for that first quarter. So at the end of the first quarter, we will give you our new midterm guidance for the next 3 years after we have closed this midterm guidance at the end of 2022, 2023.

Then on APAC EBIT behind, yes, correctly, I pointed out very clearly is that we did upfront investments. So remember that we did a small acquisition in Australia. Then we've put a new factory in there, new production lines. Of course, that was during the time of full COVID pandemic where whole Australian market was closed down for tourism as well. So of course, there, we have some catch-up to do in terms of volumes as well. We have the installed capacities for growth, we have the cost of running it. The sales have not been as fast yet but at the same time, I'm very convinced that now it's opening up. Also on Gourmet side, of course, a market like Australia is counting a lot on tourism as well. It's opening up now. The momentum is getting more positive. So I'm very convinced that the coming midterm guidance and also next year's as well, we will see a lot of growth coming from there as well. So that's the main reason as well. There are some pockets in that -- in Asia Pacific markets that were a little bit more difficult to think about during the year as well. There were some lockdowns again, especially in China. But nevertheless, overall, the growth is there. But yes, on the EBIT side, a little bit behind on where we normally should be. Yes.

Next question comes from Jörn Iffert from UBS.

Three to four questions, please. The first one would be, can you comment, please, how do you expect the timing of outsourcing deals for your fiscal year '23? And also, if you see already any negative impact in your Gourmet business from the consumer weakness across Europe? And what is your view about the robustness of Gourmet? The second question would be, please, I think your underlying EBIT of CHF 625 million looks pretty strong, adding back maybe the CHF 20 million volume impact you have would end up at occurring EBIT of CHF 645 million. When you say you are maybe growing 5%, 6% of volumes in fiscal year '23 and you have EBIT growth above. This would bring me maybe then to an EBIT of CHF 680 million, CHF 690 million for fiscal year '23. But do we need to consider anything regarding energy cost, hedges rolling forward or any other negatives at the end of the day, which can impact the EBIT in fiscal year '23? And the third and last question, please, Russia. I think you still have your operations running there. A technical question, how can you really make sure that the accountants over there are looking at the right numbers and that everything is really secured what we are used for Barry Callebaut usually in this region?

Do you want to start with outsourcing?

Yes. Sorry, I missed the first question.

And can you comment on your timing of the outsourcing pipeline? I mean are you confident for the 30,000, 40,000 tonnes for fiscal year '23? And then also in Gourmet, do you see any weakness here from consumers spreading over to your customers?

So as you know, very well, outsourcing is always high on our agenda. We never exactly know when it will come in. Of course, very excited to announce the outsourcing deal in Morocco, although it's a small one and will not bring in all the volume we need. The pipeline is good. I will expect that again next year, we will deliver on the guidance we have on that front. As we have discussed various times for every period as this moment of crisis, as these reasons why discussion on outsourcing is interesting. There is the numbers, the 36,000 last year were particularly driven out of Eastern Europe. We let all around the world, we have projects running at this moment, and we are still confident that, that will be a big driver -- growth driver for our results. On Gourmet, we, of course, also very closely watch the kind of economic outlook. We also closely watched the kind of trends we see in out-of-home eating. And there, of course, we see some decline and can expect some decline. In our numbers, it's very difficult to see yet. As you have seen, the fourth quarter was still very strong. We were challenged in our pipeline of Gourmet products, particularly, of course, of the global Callebaut brand, which comes out of Wieze. Still, we were seeing a strong pull from customers which, of course, we always say we need the market, but we are not fully dependent on the market. We have shared in previous conversations that we have extended our reach into the markets by growing the number of distributors. We have more direct customers also in Gourmet and that's still a kind of support for the strong positive growth in Gourmet. So at this moment, we don't feel the impact of the economy out there. We will keep closely watching. What we indicate, however, is that in the Q1, we will have an impact from the pipeline of Global Brand Callebaut because, of course, that pipeline takes a little bit of time to be emptied, but Wieze not producing for the time, it was standing still. It means that we now are -- have to catch up, and that will -- that impact you will see in the first quarter alone.

Yes, I think that's a good bridge towards the second question about the results. First of all, I don't give specific guidance on short term, only on midterm. But what I can -- as Peter indicated, of course, we are still having a Q1 impact of Wieze on our reported results. We started being at full capacity again towards the end of October. And as Peter mentioned, of course, the Gourmet impact was a little bit more delayed because we're running first our stocks. Of course, we have to replenish those stocks as well. That's the only aspect I see. The only other aspect that you should take into account is, of course, translation FX. You saw a big shift of Euro to Swiss towards the second half of the year. That's, of course, something that you have to take into account in your model as well. But other than that, in terms of any hedges inflation and so on, our cost-plus model has been robust and has proved there. Look at the result in this year, it was not an easy year as well. There was a lot of supply chain cost increases, energy cost increases and so on as well. We have been able to pass that through. So I don't expect any effect on that side. On the Russia side, first of all, on the accounting, we have solid controls in place. That's a given. So I don't expect anything changed here. We have a solid team on the ground. There's a local team, and we have oversight, independent oversight as well. However, having said this, we are there in a maintain mode. We are not adding any investments in Russia. It's just maintaining our assets that we have at the moment in our business that we have at the moment.

The next question comes from Jon Cox from Kepler Cheuvreux.

I guess, it is all hands to the pump a little bit earlier. Couple of questions for you. Just on the sort of like the next medium term plan, Peter, you mentioned talking about Q3. Historically, you've given it with the full year results a year ahead. Is there anything we should be worried about and maybe you're worried about, and that prevents you from maybe reverting to that -- your original 4% to 6% volume growth goal? And how confident are you of that growth? Or do you feel maybe the company has got so big maybe those growth opportunities are not there? That's the first question. Second question, just on this current plan, Obviously, you need to be doing somewhere over 5% growth this year on the volume side to get to average 5% for the last 3 years. I'm just wondering on these -- and my colleague, John asked it earlier, just about what are your clients saying? Have you seen any defections at all from customers? Or is anybody indicated, we're not going to come back to you as a result of what happened and maybe the volume impact is going to be more than just, say, the first couple of months of the year, yes. So -- and then if you would, just on some of the nuts and bolts, can you give us some idea on CapEx, tax rate, interest rate that sort of stuff for the time -- for the current financial year.

Thank you, Jon. So in our view, this time, we had quite a lot to explain in our full year results. Moreover, we still wanted to just have the first quarter behind us before we share the midterm plan. It's a call I've made please don't read any concern about our growth potential. We are a growth company. We will remain a growth company. I hopefully see that you've seen the results. Of course, a very strong underlying business and that only can give us more confidence that the model works and even works in a very, very strong way. We're seeing strong volume growth. We see the profit growing faster than the volume. And you know me a little bit by now, I particularly focus on the later part. I really believe that through mix, through innovation, we can grow our business and we can grow it smart. So please don't read in the announcement at the end of Q1. Anything that we are confident about our business, we just want to take a couple of more months to prepare ourselves and then share the new midterm guidance for the next 3 years. On the customers again, yes, you absolutely did the calculations right. We need to be slightly above the 5% to deliver on the midterm guidance. Hey, of course, we also did those calculations, and we are confident that we will get there. Are there customers who were heavily impacted because of the stoppage of Wieze, of course. We know that Wieze is an enormous site, 1 million liters of chocolates per day. There is this restriction in capacity. So that made the whole situation painful, but we, of course, have more than just the Wieze factory. We have 64 factories. We leveraged our netback to the mix to support customers wherever we could, if they were not fully dependent on the Belgium claim. We have gone the extra mile on trying to find solutions with them. And of course, that they have been painful at times, but has also built some credibility. I strongly believe, and I think customers believe that with us as well. We have responded well to this crisis. We will come out of this in a stronger way. And therefore, I can imagine some of the customers absolutely have been forced to buy from competition, but I'm not concerned that we will find a way back of this for these customers to supply them again out of our network.

Okay. Just on the nuts and bolts, Jon, on the last part. First, on the tax rate itself, of course, you saw an impact -- a little bit of country mix impact there, our effective tax rate was quite low in last fiscal year. And that's due to a mix impact, but of course, also then on the absolute amount linked to, of course, the lower profitability. There is nothing specific new to mention there. There was no major changes in the last fiscal year on the tax rate. On the CapEx side, you see a similar level to the year before. So we keep on investing in our business. You saw our announcements as well with a new greenfield factory in Ontario, Canada. That's a major investment for better-for-you chocolate. It's exactly the type of products that we want as Peter mentioned, in terms of improving our mix. But of course, we are not afraid to put CapEx behind that as well. So -- but nothing specific to mention in terms of the nuts and bolts on CapEx side last year. So it was quite flattish.

The next question comes from Lauren Molyneux from Citi.

I just had a couple. So I know you've talked quite a bit about medium term guidance on this 5% to 7%, but I was just wondering if you could give a bit more commentary on what that assumes in terms of underlying chocolate volume demand at the actual market. I noticed in one of the slides, the European market actually seemed like it declined. So what are you assuming there? And I guess, kind of how healthy is that end market as well? And then I was also wanting to touch on the G&S performance, the volumes came in a bit weaker than I think we were expecting in Q4. So can you talk maybe a bit more about the weakness that you're seeing there? And how much of that was -- if you can quantify, how much of that was maybe related to the volume impact from the Wieze factory? And then finally, just because it seems to be a theme with some other companies, how can then be about potential destocking impacts by your customers, something we've heard from some customers? And do you have a good view of the level of inventories in the trade?

So let's start with the market. So we are, of course, not blind to the market. We see around us that economic outlook is less positive. We follow Nielsen, we follow a market, and we definitely see the trends going on. In general, however, and we see that also this time is that if you look at the total market, the total market is quite resilient even in economic downturn. We don't talk about here enormous expense. So you see consumers moving sometimes from one brand to the other or from a promotion pack to just instead of a single pack. So that's kind of movements you see in the market. In general, we don't expect a dramatic kind of reduction of the market. But I think the good news about Barry Callebaut and we have shown that again and again. is that we, of course, we feel the market, but we are not dependent on the market because we always have our other sources of growth, which help us to grow consistently far beyond the market. We talked about outsourcing. I'm also always very, very proud on our organic growth, just our competitive strength through our 4 pillars of our strategy, I think we differentiate ourselves from competition. And therefore, still, we win a lot of share in the market. And then from there, we, of course, still grow, expand in the market with our portfolio, but also geographically. So -- and it's interesting to look at some historic numbers, which we collected because when we went through the financial crisis, we saw, hey, markets going a little bit down, 1%, 2% here on data point for 2009, where the market went down 1.6%. But Barry Callebaut grew at 4.1%. In 2015, the market went down with 1.4%. Barry Callebaut again grew 4%. And if you just look at a longer time period, not knowing exactly where the market will end and you look at the period 2000 to 2022, the market has grown 1.3% per annum. Hey, that's always what we indicate. The market is 1% to 2% growth on average. Barry Callebaut in that same period has been growing 6.2%. So stressing the point that we have a capability and we have proven that again and again that we can grow our business, we can grow that also significantly above the market as we have also done last year.

Yes. Just on Gourmet & Specialties, so overall, you saw an 8.8% growth in the Q4 numbers. Overall, that's still a very good number on a global scale. As I mentioned earlier, we didn't see the big impact of Wieze in that number, so minor impacts there in Western Europe. But overall, that's still more a normalization of the overall growth numbers that we have seen in Gourmet. I always repeat the same thing is when you look at overall Barry Callebaut, you want to have Gourmet growing faster than your midterm guidance and cocoa a little bit on the lower side and on average, you come to 5% to 7%. So -- but overall, it's again, shows our strength in Q4 as well that we can still grow our Gourmet division very strongly as well, 8% is not a bad number. Of course, we all got used to it in the quarters before to 20%, 20-over-percent as well as we are normalizing more our business coming out of COVID-19, but 8% is still a very strong number.

I can only confirm that, Ben, big confidence in the strategy we have put in place in for Gourmet. And as we explained before, we have been focusing a lot in driving reach. That's only still growing. We're still signing up new distributors as we just shared Levapan, for example, in Colombia. There's a whole new market. Need to sign on new distributors in the existing markets. So our reach becomes better. And we are getting smarter and smarter in this push-pool model where we not only push our products into the distribution, but also with the help of digital, of course, with the health of the CHOCOLATE ACADEMIES just really get more effective in pooling these products through. So the fourth quarter, I think, is -- you see some reflection of the Wieze already coming through. I think you will see the same in Q1. After that, I'm absolutely comfortable that we will keep accelerating on Gourmet.

Lauren, to your last point on the stocking impact, we don't see any proof of that at the moment as such in our business. But that doesn't mean it cannot happen as well. So, but I don't have any proof points or any comments that we see it in our business as well.

The next question comes from John Revill from Reuters.

A couple, if I may. You gave some sort of commentary on the cocoa and sugar prices during the year. I was wondering if you could give any kind of indication of what your expectations are going to be next year on cocoa and sugar prices? And then secondly, on the Wieze plant, can you give us any indication of how the lessons being learned. I think this is basically a one-off thing or can you say -- I mean, obviously, I can't never say never, but how likely are we to see a repeat of a shutdown like that again?

Yes, let me first take the first one. Of course, I don't have a crystal ball either on what the markets will do in the future, but I can talk a little bit about fundamentals. First of all, on the cocoa side fundamentals, overall, supply is still quite solid. We are still coming off a very strong supply where demand was affected, so we had a surplus there. So overall, I expect it to be quite uneventful -- overall in terms of the soft commodities, what you have seen with the other soft commodities because supply and demand is quite solid. There's plenty of beans around at the moment as well. We don't see any shortage. So I don't expect any changes -- major changes, of course, based upon the fundamentals. I don't have a crystal ball on what's happening on the trading market. On the sugar side as well, tougher market environment there. You saw it already in -- especially on the European sugar, it is quite solid. We don't see at this point any further indications of increases. But you have to understand as well that the input costs are increasing. The energy costs are increasing in Europe. So that's, of course, a difficult situation. And that's why I don't expect also prices to go down rapidly. On Wieze, perhaps you can tackle that one.

Yes. So a little bit nervous on this question because I remember last time, there was also another question is this going to happen, and we said it also at that moment. We are a food company. The risk is always out there. But we absolutely will learn from this. And I think there are 2 things. On the one hand, we will do everything, and we're already doing everything to make sure that contaminated product doesn't enter our lines. In case it ever happens again, we have to make sure that the impact is much less as it was in the case of Wieze. Let me just, however, take one step back. This is an exceptional situation. Lecithin, as far as I know, in the food history, there has never been a contamination of salmonella on lecithin and it's a low-risk material in general. Moreover, the common practice in the market is that on low risk materials, you will trust the certificate of analysis of your supplier. And that would be good enough then for raw material, if it's low risk to enter our factories. That's where we have learned on all low-risk materials, there is now a positive release. So we test them when they are coming in. We are absolutely making sure that we know the product, which goes into our lines. And of course, we also make sure that the suppliers we work with are audited as they have been done before, but of course, extra attention. Then what you will see is that we will -- in a huge site as Wieze, you will see more segregation of flows. This case has been so exceptional that lecithin because it's a small raw material, to be honest. But as it was a small, it feed all the lines. It could go far and therefore, had the impact on our business. And that's what we already have corrected. You see segregated now kind of dosing of lecithin. So in that sense, we will absolutely get stronger out of it. I think the whole food industry will get stronger out of this, to be honest. We will make sure that this is -- risk is further mitigated than we have ever done before, but I can never say no, never because we are a food company in that sense, there is also some risk. But please be aware, we have put every action in place -- and we have put every action in place, and we will do even more if in case we think necessary.

So could it -- how much could you say the mitigation is? I mean how much do you think the risk has been lowered? I know you can never say never because that's impossible. But is it dramatically the risk of contamination being reduced now, how would you describe the sort of things you've put in to prevent this happening again. Was it -- is it thematically improved the safety of the plant or how would you describe it, would you say?

I can really indicate that it will not happen at this scale. Let's not close our eyes, every year, multiple cases of contamination with salmonella happens in the food industry. But I think our learning and why this case became so impactful for us is that it's really brought the biggest chocolate factory in the world down, and that should not happen again. So limiting the impact, of course, I'd rather have no contaminated product getting close to one of my factories. We'll do everything for that not to happen. But in case it happens, it should not have an impact as we had on the scale and that we can, of course, guarantee.

The next question comes from Andreas von Arx from Baader-Helvea.

Just a couple of questions. Could you provide me with the organic growth volume figure for the group for '21, '22? I kind of missed it or alternatively if you could provide the volume impact from your acquisitions last year? That's my first question. Second question would be on one-offs for next year. So just that I have clarity, I mean you expect a lower volume or a volume impact still from Wieze in the first quarter. So will that still lead to adjustments that are Wieze related between reported and recurring figures in 2022, 2023 on EBIT? Or is that all already included in the numbers you have booked for '21 and '22? Then just a question on the -- maybe a bit differently asked on the destocking theme. I mean if you look at the orders for the Christmas business of your customers, and given the impact on consumer sentiment that we are seeing, do you see here any impact in terms of volumes that is being demanded or that might be lower from your customers than what you had maybe a year ago? And then last question, I mean, you have a cost-plus model. I mean we have now, I mean, since August, an increase in the cocoa price, we have significant increases in energy and are expected to have significant increases in labor costs. I mean, if I understand correctly, you are very confident that you can pass that on with our profitability impact. But you're also indicating that there might be a volume impact as we have seen in 2009 and 2015. Is that the correct takeaway from the statement?

Okay. So let me -- thank you, Andreas. So first of all, on the organic growth, I had to check myself. So the overall chocolate business grew with 5.9%, so not the total number, but chocolate business. The organic growth was 4.9%, excluding ECC right? And Claudia is helping me there as well. So the total number is 4.5%. Sorry, I had to check this one because I did not know it by heart. So overall, it's an 18,000 tonnes ECC impact for the full year. So just that you have the total number there as well. Now on the EBIT question, EBIT nonrecurring for next year. There, we are confident that we have captured the full nonrecurring in financial year '21, '22. I said it earlier on to best of our knowledge, we've captured it. So because it was based upon a detailed analysis, we don't expect to come back with a nonrecurring item in financial year '22, '23. So based upon the detailed analysis that we have done. On the destocking, perhaps you can, yes.

Yes. So we are -- as I said, we are not naive, Andreas. We see the market out there. We see customers being nervous, just what the impact is going to be of the economic downturn. We see some trends, of course, as you also probably see from -- to private label, to the promotion packs, multiple packs. We have proven, however, that, as I said before, we are absolutely impacted by markets, but we can grow beyond the market through the other growth sources of growth, which we have. So at this moment, across the regions, we see absolutely changing consumer habits. We, however, service the industry from the smallest till the largest. And that gives us, of course, always the luxury to follow the volume where it will go. Where it will not go in the market and if we see a decline of the contraction of the total market, we will try to compensate that by winning share. We will try to compensate it by a further partnership, which also, of course, help our share position or helps them move from the captive to the open market. And in general, our growth is also driven by new product categories and by emerging markets. So in that sense, absolutely aware of the economic outlook. Does it worry me for our volume outlook, no, because I committed to deliver the midterm guidance in this year and then the cost-plus model now.

The next question comes from Nathalie Olof-Ors from Agence France Presse.

I will have a question. You're not the only company who had salmonella or bacteria or E-coli or there's been several companies in the food companies in the market who we had some severe incidents. And I -- my question is, is that a pattern? Or is that a succession of isolated incidents, were there any changes in the supply chain or after the pandemic that disrupted their workflow of the food companies?

Thank you, Nathalie. So it's -- as we all know, it's an extreme complicated period where we see a lot of things happening in the market. Absolutely the war in Ukraine has, for example, put pressure on sunflower and therefore, also we see certain supply routes being taken out because the cost of transport is just too high. So there is, I think, a dynamic going on where we are sometimes forced to work with new players and review new players. Should that lead to these kind of issues more? I think not. We just need to have the right kind of discipline in place to mitigate those risks and make sure that if there is an increased risk that we make sure we test this extra, we do more audits and make sure that the risk will not impact our business in the end. So there's absolutely things going on. So answer to your question, absolutely, in supplier context where we see changes where we are having to work with our suppliers, but it should not lead to more incidents in our view.

The next question comes from Pascal Boll from Stifel.

Yes, I hear that you are quite confident regarding your underlying growth momentum, but just to make sure your reiterate midterm guidance. What is the implication of it? Is it the most part really the underlying growth and the opportunities you see and also some visibility you see in your volumes? Or is it also to a large part, a technical effect from Q4 that it was very weak this year and will be much stronger last year, obviously -- and next year, sorry? Then secondly, on outsourcing during COVID, I remember you talked a lot about an unrealized handing pipeline and that it was not possible back then to visit new sites and to come up with an agreement on new contracts. It seems that we have not seen much of a catch-up since then, even though I see that I think this year, outsourcing contributed also something around 5% to your growth. But still, I wonder if there is more to come? Then on Russia, could you give us some more details about how this business is running at the moment? We just also heard from another company that is trying to exit the market. Are there any new considerations? And then finally, on cocoa, you mentioned an improved combined ratio. In my understanding, this should also help you in terms of profitability in the new financial year. Is that correct? And what do you expect there in the market to assume like the growth of something 2% to 3%? Or what is your perception here?

Yes. First, let me answer on the midterm growth in the last year as well. It's not a question of technical or not. Overall, it's -- our midterm guidance is a range. And we are confident that we can achieve it because of the underlying business that we have. We are confident because the maturity of our business. In all of the regions and so on is there. So otherwise, we would not come out with that statement. So don't try to read too much into technical yes or no. So of course, we have a guidance that is a range. And then that's, of course, we don't give you specifics within that range.

As you grow above the volume growth. That's, of course, our guidance. I can tell you also to reflect a little bit on my own leadership. And as I said before and what you also can see in the results of Americas. I think we want to keep growing our business. We are a growth company. There are a lot of opportunities out there for us. But I try to bring it with an -- even an increased discipline on management on mix management, so customer, product mix, of course, an extra focus on innovation so that we accelerate up the value ladder. In that sense, we are confident also that we deliver on the midterm guidance from an EBIT perspective. On outsourcing, yes, the guidance is, of course, 35,000 to 40,000 tonnes. This is lower than in the past, but we have deliberately brought it down. We always say there are a lot of outsourcing deals which we could sign, but we should also see whether it's interesting enough for us. And because in the end, we have a growth, but we also have a profit ambition. At this moment, we see that if you are on the past, if you are new in a market, we often like to have big outsourcing deals to build your footprint. The exciting bit of the last couple of years, we see also smaller companies like we have seen in South and Eastern Europe will say, "Hey, I need a partner like Barry Callebaut." So I don't want to invest in my assets that's a shame of the capital. I have other places where I can invest that capital, but I also need the kind of innovation, sustainability, power and muscle of Barry Callebaut. And we don't -- we will, of course, go a little bit with the opportunities out there. We will not force ourselves into an outsourcing deal. It's not interesting. But in the end, in the broad lines, outsourcing remains as interesting as it was in the past. On Russia, Ben already reflected on it, there are no new considerations. It's a local for local operation at that moment. We don't invest in that network. We just stayed for -- to support local and international customers. And then maybe you take the combined ratio.

Yes, so, combined ratio, Pascal, you're quite rightly. So you saw it hedging more positive towards the end of the fiscal year, 3.6 versus 3.5. It is a small increase. That, of course, it has a lagging impact of 6 to 9 months. But of course, if there is no further changes you will see a slight -- further improvements there on the cocoa side. But it can change also quite rapidly as well because you have to consider also your input costs as well and also your freight and energy costs and so on as well. You're making sure that it's overall moving. It needs to move up in my opinion. But overall, I'm very pleased with the cocoa powder side of it. We have been putting quite rightfully, so a lot of emphasis from our side on cocoa powder, why is that? Because we can add quite a bit of value to it. Cocoa is not just a cocoa powder. We have a lot of value-added cocoa powders where we can, as a company as well, get the right creations for our clients as well. While on the cocoa butter side, it is, whether it's a Barry Callebaut cocoa powder -- butter or somebody else, it does not make a difference as such. So that's for me, as part of the cocoa leadership that we've done in the past as well, the right focus as well. Having said this, for us, it's very important, of course, to -- we are our own biggest supplier in cocoa. We don't necessarily have to always supply the market as well and we can be selective when we need to be. When it turns around, when combined ratio becomes unprofitable as well, we are, of course, very cautious there as well. We just compared to a pure grinder where you have to offload it in the market. That's, of course, the power of Barry Callebaut as well. That's, of course, part of our strategy that we have done, that we are very implemented years ago, our cocoa leadership is having focused on that side.

So if I understood that correctly, Peter, we should expect more smaller deals in outsourcing than large deals that we have seen after 2010 in the next couple of years?

I'm open for very big deals if they just, of course, do make sense. And we have signed big outsourcing deals, which I'm very proud that we have renewed some of them. So you have seen the renewal of Hershey. That is a big partnership and we always credit them also for helping us to become the market leader in North America. And their scale has helped us to -- in that direction. That's, of course, there are places where we don't need that anymore where we are the market leader. We are looking much more for kind of smaller partnerships, outsourcing deals. So I don't exclude the big ones. They are a great way to establish ourselves to get scale into the market, get a footprint into the marketplace. But hey, I'm really excited. As you just heard about the smaller ones as well because I think they see in the end, not only someone who can provide them with a product, they also see someone who can innovate with them, who can drive the sustainability agenda and still help them to be cost leaders or at least have a good cost price for the products they source.

The last question for today's call comes from Alex Sloane from Barclays.

Three questions from me, please. Just the first one. So recurring profit was obviously up double digit. You have a strong balance sheet as you pointed to. So the question would be, I guess, why haven't you raised the dividend, given the payout on the recurring net profit is below 40%? Second question for Peter, just going back to the new midterm guidance. Are there any data points that you're looking out for over the next few months to make a decision one way or the other on the midterm guidance range? Or is it more that you just want to communicate that new guidance range separately to the release today, which obviously has some moving parts to it? And then finally, just on the next-generation chocolate, it sounds really interesting on paper, and I'm sure it will be very interesting to your customer base. Can you maybe talk about the time line to commercializing that opportunity? How much capacity do you have today for this product versus how much will you need to invest over time to support growth here?

First, let me answer on the dividend flow. You pointed out quite correctly. So when you look at -- so the payout ratio is above 40% when you look at the reported result when you look, but even when you look at recurring result, it's still a solid 36%. It's within the range of 35% to 40%. So don't try to read too much into it as well. It's a proposal to the AGM. Of course, we wanted to make sure there is also a stable atmosphere as well because we are confident overall that we have captured, of course, in a nonrecurring part that is really behind us and that we can look forward as well. And that's the reason why we did it, we proposing it this way, but it's within the range. So it's not like we're nonrecurring that we are out of the range as well.

And on the midterm guidance, the new midterm guidance, I love data. I'm always going after it. But you feel hopefully also quite well that we are confident about our growth potential. If Wieze would not have happened, we would have had an amazing kind of growth through the year, a 5.3% is significant growth compared to the market. But of course, we would have ended much higher than that. In general, therefore, the momentum in the business gives us a lot of confidence and I don't expect that we will find a lot of data points, which will bring us away from where mine is going at this moment. You're absolutely right. I think this time, we felt we had quite a lot on the agenda and we have quite a lot to explain. We felt that the Q1 moment was a better moment to come out with the midterm guidance. So look out for that, and we will prepare for a clear explanation. And then finally, second generation, I take that one. I still have a big marketing heart. So -- and I was in fairness last week. Yes, it's the shame for those who are not here, but great for those who are here because you can taste a second-generation chocolate. And the proof is in the tasting. As always, of course, with chocolate. But particularly in this situation because the beauty is that we have found, based on years and years and years of understanding of the Cocoa bean, I've explained to you guys multiple times that 10 years ago, when I started as Chief Innovation Officer, I wanted to really understand all those precursors, which are in the cocoa bean towards health, but definitely also towards taste. And we started to map that out. Moreover, we start, of course, we learn a lot about processing. And these 2 together, understanding cocoa bean, understanding how to process that cocoa bean best to get and make the flavors come out of a specific kind of bean has led to the second generation of chocolate. So great, what we say, the purity of the cocoa flavors come out in the chocolate because we understand that cocoa bean so well. I know how to process it. We don't need to mask any kind of flavors. And that's why you certainly have a label, which is only 2 ingredients for dark and 3 for a milk. And most exciting is that from now on or from the second generation of chocolate, cocoa will be first and sugar will be last. So you have a 50% sugar reduction which is, hey, close your eyes when you taste it, you will not say it. It's not what your experience is. It's a very nice cocoa flavor coming through in the chocolate, a very nice chocolate experience, but that it comes with such a simple label. Then it comes with 50% less sugar, I think will -- that gave us the confidence to say, hey, we have a paradigm shift that's why we call the second generation of chocolate because, hey, I'm probably not a normal consumer, but I have now tasted this a few times. I don't see any reason why I should go back to the first generation because I think it's a great tasting chocolate and it comes with 50% less sugar, which I find quite a convincing story. So how long will it take? Of course, we have talked with our bigger customers. But we always say they need 12 to 18 months to really bring this to market. So let's give them the time. This is big, as you hopefully have seen in the news, and we expect a lot from this new innovation.

Gentlemen, that was the last question from the phone.

Okay.

Thank you. And with that, we conclude the presentation for today. Of course, we will also be available for any further questions either later on or tomorrow morning, if you wish to. Thank you very much.

Thank you.

Thank you.