Barry Callebaut shares fell on Thursday after the chocolate maker announced that quarterly sales volumes had declined as cocoa prices boosted costs.
The news comes after months of reports of a heatwave impacting cocoa growth, with the cocoa grind in the Ivory Coast reportedly down 19.8% year-on-year in April.
The announcement by the Swiss company raised investor concerns.
Stock was down 10% in afternoon trading and on track for its worst day since 2015, and it was the worst performer on the Europe-wide STOXX 600 .STOXX index.
Borrowing
Vontobel analyst Jean-Philippe Bertschy said, “The market realises that the high cocoa bean price is having a significant impact on the free cash flow and financing costs.”
Barry Callebaut is borrowing heavily to fund the inflated value of its raw material inventories, issuing six bonds worth two billion Swiss Francs over the last six months, Bertschy added.
In the third quarter alone, the firm issued 730 million and 700 million Swiss francs in bonds.
In an earnings presentation, the company flagged a negative impact of 1.1 billion Swiss francs from higher bean prices on its free cash flow in the first half of the fiscal year, which ends in August.
The company also hinted at further burdens in the second half.
Early Indication Of Risks
Barry Callebaut’s chocolate sales volumes fell 0.3% in its third quarter ending in May, while in Eastern Europe they dropped by 7%.
An analyst from Baader Helvea, Andreas von Arx, said that the bigger slowdown in the region might be an early indication of risks stemming from further price increases globally, as they look higher than average levels of the past.
Cocoa bean prices were 131% higher in the nine months to May 2024 than in the previous comparable period, according to London terminal market prices.
The impact of Barry Callebaut’s stock performance also weighed on its peer – Lindt & Spruengli – whose shares fell 2%.
Read More: Ivory Coast Regulator Suspends Bean Purchases In June
