Lindt & Sprüngli continues dynamics of long-term success
Lindt & Sprüngli continues its dynamics of long-term success of the previous years in terms of growth and profit after the transitional year 2009. Consumer sentiment improved slightly as the global economy slowly stabilized and showed the first visible signs of an upswing. Although most chocolate markets reported moderate growth in value terms over the first six months of 2010, there was stagnation in many places in terms of volume, especially in Europe and the USA. Competition, which had become even more intense during the global economic crisis, continues to focus very heavily on pricing. Rising raw material prices, particularly for cocoa beans, and the extreme fluctuations experienced by key currencies made the economic framework conditions even more difficult.
Against the background of these challenges, Lindt & Sprüngli has not only succeeded in meeting the growth and profit forecasts published last March, but has also slightly exceeded expectations. In comparison with the same period in the previous year, the Group achieved organic growth in local currencies of 9.2% as at June 30, 2010, far exceeding the performance of the chocolate market as a whole. In Swiss francs, this equates to sales of CHF 1,057 billion, an increase of 7.9%. The difference between growth in terms of local currencies and Swiss francs is mainly due to the continued weakening of the US dollar, euro and pound sterling.
The growth was primarily fuelled by increased volumes and improvements of product mixes as well as the launch of innovative products. The sales success enjoyed by new products reflects the consumers’ appreciation of the creativity and quality offered by LINDT. In light of the still insecure economic situation, price adjustments to date have only been made cautiously and selectively due to the rising cost of cocoa. The company will keep striving to offset the record raw material costs as far as possible through increased efficiency and cost management. Potential price increases will therefore mainly depend on the rate of inflation and the currency situation in different countries.
All subsidiaries and regions contributed to the achieved growth. It is thanks to this positive trend that Lindt & Sprüngli has once again been able to gain market shares across all its markets. Double-digit growth rates were gained in North America. All countries in Europe, particularly the UK, France and Sweden, reported important progress. In Italy, too, where last year’s financial crisis had an especially severe impact on consumer sentiment, sales increased significantly in the first half of 2010. On the Swiss home market the previous year’s sales were also exceeded. Export operations to Asia, the Middle East and Latin America, as well as the duty-free/travel retail business, have reported important progress. A particular highlight has been the opening of a new cocoa mass facility at the manufacturing plant in Stratham, NH, which guarantees full control over all manufacturing steps in the USA from now on, from the bean to the finished product.
Operating profit (EBIT) at the end of June 2010 stood at CHF 33.9 million, representing an increase of 40.7% or CHF 9.8 million compared to the result of the previous year of CHF 24.1 million prior to the recognition of restructuring costs. This positive performance is the result of the measures taken over the past 18 months to streamline and boost efficiency across all areas.
In the light of an economic situation which, although on the road to recovery, has not yet stabilized, and bearing in mind the continuing volatility of the framework conditions in the raw materials and currency sectors, Lindt & Sprüngli will continue to pursue its proven premium strategy based on quality, innovation, passion and exclusive chocolate expertise. Lindt & Sprüngli confirms the sales and profit forecasts for the full year 2010 which it announced in March 2010 and is expecting organic growth in sales of 5 to 7%, and an EBIT of CHF 300 to 340 million. The company’s priority will remain the strengthening of the brand and gaining market shares.
When analyzing the Group’s semi-annual earnings, it is important to bear in mind the seasonal and gift-oriented nature of the premium chocolate business: the Lindt & Sprüngli Group makes less than 40% of its annual sales during the first half of each year, but at the end of June these sales are charged with around half of the fixed costs of production, administration and marketing. This means that the profitability of the Lindt & Sprüngli Group in relation to sales in the first half of the year cannot be equated with its profitability over the year as a whole.
