FDBusiness.com

Swiss confectionery manufacturer Lindt & Sprüngli Group is continuing to grow faster than the chocolate markets in which it operates and to win new market shares. In the financial year 2014, Lindt & Sprüngli reported a17.4 % increase in sales to SFr3.385 billion (€3.161 billion) and a 17.4% growth in operating profit (EBIT) to SFr 474.3 million, including non-recurring costs and reflecting the acquisition of Russell Stover.

In local currency terms, acquisition-adjusted organic growth of 9.8% is well in excess of the medium to long-term annual growth target of 6-8%. Excluding the proportionate contribution of Russell Stover, the EBIT margin grew by 20 basis points to 14.2% in line with the strategic earnings forecast of an increase of between 20 and 40 basis points.

These good results were achieved despite largely subdued consumer sentiment, high commodity prices, and a challenging currency situation. The above-average growth of the group once again clearly exceeds that of the chocolate markets and was driven by higher volumes and innovations, further progress in the seasonal sector, and strong development of the company’s own global network of retail outlets. Substantial market share gains were made in all the core markets and in the emerging growth markets.

The subdued economic situation in Europe, especially in the second half of the year, had an adverse impact on the currency environment and resulted in a weaker euro. On the other hand, the US economy picked up noticeably, which boosted the dollar and had a positive impact on consumer sentiment. In Europe, however, consumer confidence remained relatively weak. Despite this challenging environment, which was additionally impaired by a massive rise in important commodity prices (cocoa, hazelnuts), sales of high-quality chocolate products from Lindt & Sprüngli achieved above-average growth, clearly outperforming the trend of the chocolate markets which reported only slow growth; this was reflected once again in market share gains.

The key event that will sustainably strengthen Lindt & Sprüngli’s future was by far the take-over of the traditional American chocolate manufacturer Russell Stover announced mid-July 2014 which was the largest strategic acquisition in the company’s history.

Lindt & Sprüngli has now advanced its position in the USA to become the clear number three in the world’s largest chocolate market, the uncontested leader in the field of premium and seasonal products, and one of the most important partners for the local trade. Substantially higher volumes in all countries, a consistently high pace of innovation, continuous geographical expansion, and the dynamic development of the company’s own retail network all contributed to this good result.

Both in Europe (+6.5%) and in North America (+14.3%, excluding Russell Stover) organic growth is well above the prevailing market average. In all other regions, outstanding organic growth of 13.9% was also achieved, attributable in large measure to exports from Switzerland and to the Duty-Free business.

During year, the group’s investments also remained high. A total of SFr234.6 million was spent mainly on the extension and optimization of production capacity.

To finance the acquisition of Russell Stover, on September 24, 2014 Lindt & Sprüngli issued a bond loan in three tranches with maturities of three, six and ten years. Despite these transactions, the balance sheet and capital structure remain extremely robust. At the end of 2014 the equity ratio was 53.8% (previous year: 67.9%). The share buyback program which began in the autumn of 2013 for a maximum of 5% of the registered equity capital was concluded on time on December 12, 2014, with a total buyback volume of SFr54.6 million. With a price gain of 18.8% and 22.7% respectively at the end of 2014, Lindt & Sprüngli registered shares and participation certificates outperformed the SMI (+9.5%) by a wide margin.

For the current fiscal year Lindt & Sprüngli has confirmed the middle- to long-term target for organic sales growth of 6-8%. The integration of Russell Stover into the group will be the number-one priority this year. The strong Swiss franc and sustained high commodity prices continue to present great challenges. After successful completion of the integration of Russell Stover, Lindt & Sprüngli will adhere again to the medium to long-term profit target of a 20 to 40 basis points increase in the EBIT margin.