Barry Callebaut (BYCBF, Financial) is a vertically integrated chocolate company. The Swiss-based chocolatier is involved in 25% of all chocolate.
The stock trades for 1,370 Swiss francs ($1,435.11), there are 5.49 million shares, and the market cap is 7.521 billion francs. According to the Financial Times, earnings per share are 45.70 francs, and the price-earnings (P/E) ratio is 30. The dividend is 14.10 francs, and the dividend yield is 1%.
Revenues grew from 5.866 billion francs in 2014 to 6.677 billion francs in 2016. Total costs of revenues did rise from 5.005 billion francs to 5.814 billion francs over that time frame. The stock trades over the counter in the U.S.
Free cash flow was 420 million francs last year, and the free cash flow yield is 5.58%. That’s not a bad valuation based upon free cash flow yield.
The balance sheet shows 457 million francs in cash and 861 million francs in receivables. The liability side shows 552 million francs in payables and 1.91 billion francs in debt. I’d say that’s a pretty decent balance sheet, especially for a company dealing with a pretty stable product like chocolate.
Barry Callebaut is totally vertically integrated. It helps the farmers grow cacao, processes it, distributes and even sells chocolate to the end consumer. The company claims that it is involved in 25% of all chocolate.
The company is going to announce a major breakthrough in September. I have no idea what it’s about. Maybe a chocolate that is sugar free that tastes as good as the real deal. Forty-four percent of sales come from Europe/Middle East/Africa, 28% Americas, 4% Asia and 24% global. Sixty-five percent is supplied to food manufacturers, 24% cocoa and 11% gourmet.
In the first nine months of the year, sales are up 3.7% in Swiss francs. Cocoa prices are down 30%, and sugar is down 23%. Volume was up 17.2% in Asia. That’s quite a jump.
This year, Callebaut has produced a fast-melting chocolate, new fruit fillings, something the company calls “gelateria” and a product line of Mediterranean-grown organic nuts. The company has research facilities all over the world. It just recently bought an Italian food decorations company. It also makes biscuits and meringues. Perhaps Callebaut will continue to spread into other foods.
The strength lies in globalization. Ice cream factories and chocolate manufacturers don’t have the time for research. Callebaut specializes in this. It’s easier to just outsource.
CEO Antoine de Saint-Affrique predicts good times for chocolate with low bean prices. Sales have been down a little over the years in the U.S. and Europe with people trying to watch their weight. Lower cocoa should spur sales. He did mention that low prices would hurt Côte d’Ivoire and Ghana. Farmers in these countries live on less than a dollar a day. Callebaut knows this is too low and is trying to change the industry.
Callebaut is an interesting company. It’s barely mentioned in the U.S. financial news yet is an awesome company. Low cocoa prices could drive the stock’s price.
Disclosure: We do not own shares.
