Barry Callebaut AG (BYCBF) Q4 2026 Earnings Call Transcript

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Good morning, everyone, and welcome to Barry Callebelt's full-year results presentation for 2025-2026. I'm Sophie Lang, Head of Investor Relations, and today's meeting will be hosted by our CEO, Heinz Schumacher, and CFO, Peter Van Ester. As usual, at the end of our presentation, we'll have a Q&A session for analysts and investors. Before we get started, please take note of the disclaimer on slide two, and I'd also like to inform you that the webcast and conference call is being recorded. With that, I hand you over to our CEO, Hein Schumacher.

Thank you, Sophie, and good morning, everyone. And thank you for joining us for our full year results presentation. I hope that you enjoyed the Flavor Code video at the start. It's our latest innovation, and I'll come back to it a little later. Now, let me start with the agenda for today. I'll begin with the key messages for the year. Peter will then take you through the financial performance in more detail, and I'll then come back to update you on the progress that we are making with our Focus for Growth action plan, before closing with our outlook and guidance for the new year. Now, let me start with the key messages from the year. Importantly, we returned to volume growth in the second half. Delivering two consecutive quarters of growth, with volumes up 5.7% in both Q3 and Q4. And well ahead of the declining chocolate confectionery market. Within this, I'm particularly encouraged by the momentum in our 10 priority markets, identified under Focus for Growth. These markets delivered volume growth of 7% in H2. Outperforming the rest of the business and providing some early evidence that our focused approach is beginning to deliver results. Another highlight was Gourmet in the fourth quarter, where we saw a strong customer response to pricing actions, resulting in double-digit volume growth. From a profitability perspective, EBIT declined during the year, which Peter will discuss in more detail. However, I am pleased that through significantly lower financing costs, we were able to recover around two-thirds of the EBIT decline at the profit before tax level. And we also continued to progress on the balance sheet through improvements in our working capital cycle and actions to enhance our resilience to cocoa bean price volatility. We generated 2 billion of free cash flow and further reduced leverage to 2.9 times. Underpinning all of this is our Focus for Growth action plan. We are still in the early stages of the journey, but we are seeing encouraging signs of progress across customer focus, commercial execution, and regional empowerment. And with that, let me hand over to Peter to walk you through the financial performance in more detail. Peter.

Thank you, Hein. And good morning, everyone. Before turning to our financial results, let me briefly put the year into a broader market context. While chocolate demand has been challenging this year, we're seeing a number of encouraging signs that demand pressures are easing. First, industry grindings have returned to growth. Global cocoa grindings increased by 14% in the third quarter. This is the second consecutive quarter of positive growth. Particularly encouraging was Europe, where grindings were up 3%, the first quarter of positive growth in almost two years. Second, consumer pricing is beginning to moderate. After an extended period of significant price increases across the category, recent Nielsen data show that prices in Western Europe declined by 0.7% over the last two months. More broadly, we're seeing our customers re-engage in category growth initiatives, increasing promotional activity, investing in innovation, and supporting their brands through marketing campaigns. As a result, while chocolate confectionery volumes remain negative, the pace of decline is improving. Nielsen market volumes declined by 3.2 percent. Globally, in the last three-month period, representing a meaningful improvement compared to the declines we saw earlier. So, while the market remains challenging, they are becoming progressively more supportive for the industry and for us. With that context, let's now turn to our volume performance by quarter. In quarter four, we delivered 5.7% volume growth for the second quarter in a row now. This is significantly ahead of the chocolate confectionery market that remained in decline, as I have just been showing. There have been several drivers behind the quarter for momentum. First, Goumet. Goumet delivered a strong quarter with volume growth of 13.6%. As you may remember, our price lists earlier in the year were set shortly before Coco market prices declined very strongly, which impacted our competitiveness. Since the summer, we've been adjusting pricing across markets, and the fourth quarter reflects the positive response from customers on these actions. Second, food manufacturers in Western Europe delivered exceptionally strong growth. While there is underlying improvement in customer demand and commercial execution, a significant portion of the growth was driven by contracts we closed during the period of increased industry overcapacity earlier this year. We expect some of these lower-value contracts to be phased out progressively through this fiscal year. As with our focus for growth, we focus on more profitable value-added opportunities in priority markets and segments. Next to these two factors, we also saw continued momentum in both Amea and Global Cocoa. Which brings me to the next page with our full-year volume performance per region. Over the full fiscal year, we saw, for the group, a volume decrease of 0.7%. When we look to the left of the chart, we see that food manufacturers' volumes decreased slightly. The challenging market environment, with large customers adapting behaviors in the context of high prices, was partly offset by better momentum for regional food manufacturers. Goume volumes increased by 0.8% over the year, supported by a strong quarter four, as I just said. Global cocoa declined as a result of negative market demand in the first half of the year. Growth, however, was double digits in the second half with a low base of comparison, but also an increased market demand, especially for cocoa powder. To the right of the chart, you see that globally, our chocolate volumes declined by 0.5% for the year, and that's well ahead of the minus 4.3% decline of the market, as reported by Nielsen. Western Europe saw 0.2% volume growth, driven by the strong gourmet and food manufacturing dynamics in Q4 that I talked about before. Central and Eastern Europe grew by 1.1% ahead of the market, with strong growth and continued momentum for both local and regional accounts. North America decreased by 6.1%, impacted by the declining market, as well as network supply disruptions we've seen in the first half of our fiscal year. In contrast with other regions, this market remains to see negative momentum. Nielsen market volumes in North America declined by 6.7% in the last three months, so worse than the 5.8% in the full year. Our volumes in North America declined by 1.4% in the fourth quarter, so we have been recently outperforming this challenging market. Latin America increased by 1.2% as a result of a strong fourth quarter, especially in Goumet. And finally, our volumes in Amea grew by almost 10%, driven by momentum with key customers in India, market share gains in China, and additional business we managed to secure in Australia. Now, moving to EBIT now. Recurring EBIT in constant currency decreased by 14.1% to 604 million Swiss. The EBIT bridge on this page shows the respective moving parts. Coco saw a strong profitability in half year one, given the more favorable margin environment and the market volatility, which we were able to capture. This was offset by the negative impact from a temporary Goumet long position. As a reminder, the Goumet business typically operates with price lists that are fixed several months in advance. Earlier in the year, COCO prices declined at a very fast pace after we had already established our pricing. This temporarily left us with price lists that were out of sync with the market conditions at that time, and that created a need for commercial investments. Now, this has been a short-term dynamic and is now behind us since this summer. We also saw a meaningful negative impact on EBIT from the lower year-on-year pass-through of finance costs, given that this pass-through effect comes in the revenue line, so above EBIT, and the offsetting cost reduction only comes below EBIT, so it negatively impacts EBIT without impacting the PBT at the bottom line. Finally, we experienced higher operating costs related to supply disruptions, particularly during the first half of this year. An important note to this EBIT evolution is that our actions to strongly reduce financing costs have enabled us to recover about two-thirds of the absolute EBIT decrease at the profit before tax level. And that you can clearly see on this chart. Our recurring EBIT decreased by 109 million Swiss francs, while our recurring profit before tax decreased by 40 million. The 69 million we covered between the two represents the year-on-year reduction in net financial costs. This improvement was driven by a series of actions to strengthen our balance sheet and to reduce our debt. Over the course of the year, we repaid approximately 1.5 billion of debt across multiple instruments. That includes term loans, should shine, Swiss bonds, and the 849 million euro bond buyback that we completed in June. And we also reduced outstanding commercial paper and bilateral facilities. Turning now to free cash flow. Free cash flow was very strong at 2 billion Swiss francs during the fiscal year. Reflecting both favourable cocoa price dynamics and structural actions we have taken to improve our working capital efficiency. Let me break this down in three components, as you can see on the slide. Starting with the brown box, the cocoa bean price impact. This had a positive 1.5 billion impact on free cash flow for the fiscal year. The bean price closed in August at a relatively similar level as the August before, at 4,859 British pounds at the end of August 26, versus 5,300 at the end of August 25. But we did see a significant free cash flow inflow at lower prices in half year one, where the bean prices decreased significantly. This benefited us during the peak buying period, particularly in non-West African origins, which do not have the same forward contracting model. Moving to the green box, which is operational free cash flow. This had a positive effect of 0.9 billion for the fiscal year. Here we saw major operational benefits from actions on cash cycle reduction, on which I will come back in the next slide. And finally, looking at the yellow box, we invested 336 million in our manufacturing footprint and capabilities. Looking ahead to fiscal 27, there will be a delayed impact on working capital from the higher cocoa bean prices in the last months of fiscal 26, in the range of a few hundred million Swiss francs. However, we expect this to be offset by structural actions that we continue to improve the cash cycle and support our ongoing deleveraging agenda. Translating this into leverage, we saw a strong reduction to 2.9 times at the end of August, from the peak of 6.5 times in February last year, and also well below the 3.9 we reported at the half year. This reflects a reduction of net debt of more than 40% over the course of the year. It's also worth putting a bit of focus on the fact that the reported leverage is different if we adjust it for our readily marketable cocoa bean inventories. At that moment, our leverage would be 1.5 times. And importantly, when we do that, this adjustment only excludes cocoa beans. It does not adjust for cocoa products or chocolate inventories. This progress has been supported by the actions we have taken to make this business structurally more resilient to cocoa bean price volatility. Operationally, first, we have broadened our geographical sourcing flexibility, we've increased the use of our bean blending capabilities, we took actions to structure reduce inventories, we're also improving demand and inventory planning, and we're optimizing contracting across the value chain. On the financing side, we've strengthened both on flexibility and liquidity. We implemented a letter-of-credit facility to provide less cash-intensive solutions when we are facing margin calls. And we established a 2 billion borrowing-based facility, which provides additional flexibility through periods of prolonged cocoa price volatility. We will continue these actions through fiscal 27, with the objective to further strengthening the resilience of the balance sheet and to continuing our deleveraging agenda. With that, let me hand back to Heim to take you through the progress on Focus for Growth.

Thank you, Peter. I'm encouraged by how we are progressing since we launched Focus for Growth in June. Focus for Growth is about stronger fundamentals. Clear portfolio choices and accelerated growth in value-added cocoa and chocolate solutions. We are making two clear and deliberate shifts from our existing foundation. First, we are evolving towards a more solutions-oriented business, scaling targeted specialties in attractive, faster-growing segments, where we can differentiate and create more value for our customers. Second, we are becoming much more deliberate about where we want to grow, shifting more decisively towards premium segments, and accelerating the growth of our gourmet business. And we are making progress. Importantly, across a number of key indicators, and thanks to the work of our teams, our fundamentals are improving and moving in the right direction. First and foremost, our people. Focus for Growth was developed with significant input from our teams, and it's encouraging to see the organization increasingly engaging behind the direction that we have set. Since February, our office employee net promoter score has improved by 7 percentage points. And this is an important step forward and an early indication that the changes that we are making are gaining traction across the organization. Second, quality and safety. During fiscal year 2025-26, we recorded zero critical quality incidents and zero product recalls. And we continue to strengthen our network, processes, and quality culture to sustain this performance over time. We are also seeing encouraging improvements in service levels, including on-time info in North America, where restoring consistent execution is an important priority. Third, sustainability and traceability. We are ready for EUDR. Over the course of the year, we have further strengthened traceability, geolocation, and due diligence capabilities across our sourcing activities, and this has included improving data quality and working closely with suppliers, customers, and other partners across the entire value chain to prepare for implementation. And finally, customer centricity, which sits at the heart of Focus for Growth. Here, too, the early indicators are encouraging. Our customer net promoter scores improved by 8 percentage points in Western Europe and 9 percentage points in North America, compared with the prior year. Now, we have more to do, but the direction of travel is clear, and the fundamentals of the business are strengthening. We are also progressing well with our commercial growth agenda. The organization is more commercially focused, more disciplined, and better equipped to deliver on our commitments. And let me share more detail on each of our five growth priorities. Starting first with our global accounts. Here, our ambition is to deepen these strategic relationships by delivering consistently strong service, By co-creating innovation with our customers, Developing joint sourcing programs and becoming an even more important solutions partner, particularly in specialties. And we're mobilizing more consistent global account management models. The global account teams will set the standard for how we engage with strategic customers around the world, drawing on the right functional expertise from innovation to procurement and co-co. And this will help us enhance customer experience and move from managing individual opportunities to developing the full potential of each customer relationship. Let me just share two examples of how we are strengthening these important relationships. The first is ice cream, one of our focus segments. And with the Magnum Ice Cream Company, we are now working side-by-side on product innovations in a joint innovation office inside Cold War Science Park in the UK. The second example is with Mondelez. Earlier today, we announced our landmark Future Farming Partnership in Brazil. Future Farming Initiative. It is very important to us because this partnership is truly unique in the industry. It establishes the operating model and capabilities to scale high-tech cocoa farming, commencing in Brazil, and spending 15 years. And the benefits are clear. A higher productivity per hectare, greater geographic diversification, improved supply, and price predictability. And, of course, a fully traceable deforestation-free sourcing. And importantly, this model is scalable, and as customers increasingly look for deeper, longer-term partnerships around Cocoa Supply, we see the potential to expand this approach over time. It's a powerful example of how we can use our scale and our unique capabilities to create more value for our customers. Now, moving to regional food manufacturers. Here, we have deliberately focused our commercial growth agenda on 10 priority markets, where we believe we have the strongest opportunities to win. And as I shared earlier, these markets are already outperforming the group with volume growth of around 7% in H2. And that is encouraging early evidence that greater focus and stronger regional ownership are translating into results. Greater commercial focus also means being more intentional and evolving where required to focus on the more profitable, value-added growth. Here, I wanted to highlight a few examples. First, we are becoming more targeted internally to pursue opportunities specifically in segments where we want to win. Meaning faster growth, higher margin segments such as ice cream, and for example bakery. Second, in Western Europe, some contracts were secured during the period of heightened industry overcapacity earlier in the fiscal year. And we expect to progressively phase out some of this lower value volume throughout fiscal 2026 and 2027 as we redirect our capacity and the resources towards more attractive opportunities. Finally, the transition with Hershey. Which I will come to on the next chart. At the same time, we are taking action across our manufacturing footprint to ensure we have the right capacity in the right markets to support our ambitions. Now, let me talk about our evolving partnership with Hershey. We began our collaboration with Hershey in 2007 under a long-term agreement with an initial term of 15 years, subsequently extended to the end of calendar year 2027. And over nearly two decades, the partnership has supported the growth of both companies in North America. Since then, Strategic priorities have evolved, and with the current partnership agreement expiring at the end of its term, we are working together to finalize the future scope of our commercial relationship. What is clear is that this will have a significant volume impact in North America, reflecting the historic scale of the relationship. For this fiscal year, 26-27, we expect an impact of around 1% at group level. With any further volume impact dependent on the future commercial arrangements. Importantly, though, there is no impact on profitability in fiscal year 26-27 and beyond. So while the volume impact is meaningful, there will not be a corresponding impact on profitability. And strategically... We will also have more flexibility going forward, since the historic agreement included certain restrictions on who we could serve in North America. And this aligns with Focus for Growth. We will use this increased flexibility to prioritize our resources behind differentiated, more profitable, and value-added growth opportunities. The volume effects that we are describing here are already reflected in our FY26-27 guidance, which I will come back to later on in the presentation. We are advancing targeted investments and reducing complexity to create a more flexible and efficient manufacturing network. In North America, we are expanding our state-of-the-art facility in Brantford, Canada, to increase Cocoa Codings capacity and strengthen customer service. And at the same time, we are simplifying our network by consolidating production into larger, more efficient sites, including the proposal to close the Henderson facility in the U.S. and the beverages manufacturing site Chester in the U.K. during the second quarter of 2027. In beverages, this will further strengthen our hub in Sweden. And importantly, we are also investing for future growth. Indonesia is one of our priority emerging markets, and I am pleased to announce that our board has approved a new greenfield facility in Karawang, near Jakarta. This will expand our local manufacturing capacity and provide a platform to support our growth ambitions across ASEAN, with commercial production planned for the first quarter of 2029. And these actions will support improved asset utilization, greater operational flexibility, and a more efficient cost base. Now, moving to gourmet, where we see significant potential to accelerate premium growth. And as Peter already highlighted, we saw a strong momentum return in the fourth quarter, with gourmet volumes up around 14%. And we are now building on that momentum with a much clearer strategy around our brands, innovation, and customer experience. First on brands, we have sharpened the roles within our portfolio. And with Callabout, we recently launched our new global Taste Starts With You campaign around our five iconic 1911 chocolates. Putting chefs and their creativity at the heart of the brand, and using recipes, inspiration, and digital content to drive greater engagement and usage. But at the same time, Cacao Barry has a distinct role as our technical expert brand, building on its heritage, its expertise, and strong relationships with professional chefs. And then finally, innovation. I've just returned from Antwerp, in Belgium, where we launched Flavor Code at our inaugural Innovation Summit alongside the World Chocolate Masters Competition, a wonderful event. And Flavor Code is a proprietary approach to cocoa fermentation, and that allows us to create distinctive, intense flavor profiles, truly outstanding, and reproduce them consistently, entirely from cocoa. The first commercial expression is Callabout Flavor Code 01, developed initially for gourmet across applications including pastry, confectionery and ice cream. But this opportunity goes beyond gourmet. The technology has the potential to be applied more broadly, including in food manufacturers, opening up further opportunities for differentiated, value-added solutions. And this is exactly the type of innovation that we want to accelerate under Focus for Growth. Proprietary, differentiated, and with the potential to scale. We have talked about solution selling of specialties already. And to back this, we are releasing additional capacity for filled and baked inclusions across the global network. For example, one new baked inclusions line in India has just gone operational in October. And at the same time, we are strengthening export capabilities and warehousing to support our global customers. And this is just one example and more to come. We see a lot of growth potential with specialties. Demand for premium cocoa powders remains high, and we see continued growth potential. Short term, the focus is on freeing up capacity across the network to produce more. And midterm, we will invest to increase production. Last week, we announced a new functional cocoa powder replacer in partnership with Planet AFoods. A high-in-fiber, EU-sourced and produced, allergen-free and cost-effective solution. So, as you can see, we are continuing to innovate also in cocoa powders. Alongside our growth agenda, we're also building a more scalable and efficient cost structure. And over the last five years, our fixed cost base has increased. And we need to change that trajectory and establish a stronger culture of productivity, of cost discipline, and of accountability across the organization. We have already taken initial actions. Including tighter discipline around areas such as consulting and travel, but the opportunity goes much further. And following the implementation of our new organizational structure on September the 1st, we are reviewing how we can operate more effectively and efficiently to accelerate the execution of Focus for Growth. And we are therefore launching two productivity programs. First, on the operational side, we see opportunities across material usage, factory support, and maintenance efficiency, in short, in our supply chain. And second, in SG&A, we are looking at how we can simplify structures and streamline decision-making, reduce duplication, and ensure that our resources are focused on our strategic priorities. Now, the work on these priorities is underway, and we will share more as we progress throughout the year. Our priorities for this fiscal year are therefore clear. We continue to strengthen our fundamentals. We will drive our commercial growth agenda. We will focus and invest behind our 10 priority markets, and we're commencing an enterprise-wise productivity program, Ultimately, to accelerate our financial performance. This brings us to our guidance and outlook for this fiscal year. But before we go there, let me first share our perspective on the cocoa market as we enter the 26-27 crop season. For the new crop, we are seeing a later start to the harvest. And we are closely monitoring weather developments and the potential impact of a stronger El Nino. The important point, however, is that the market is starting from a very different position than it was two years ago. Because at that time, weather disruption came on top of successive supply deficits, with very limited buffer in the system. And that significantly amplified the impact on cocoa prices. Now today, the market is considerably more resilient. We are entering the season following two years of surplus. And industry coverage is healthy, and terminal stocks are increasing. The value chain has also adapted. Customers have increased forward coverage, procurement planning has improved, and we estimate that cocoa prices of around £5,000 per tonne have largely been reflected in consumer pricing. So, while we currently expect a deficit in the 26-27 crop year, the cumulative two-year position should remain in reasonable surplus. And that gives the market a much stronger starting point from which to absorb any potential weather-related volatility. And based on what we see on the ground, we continue to believe that a bean price in the range of roughly 3,000 to 5,000 pounds per ton represents a sustainable level over the medium term. Of course, cocoa markets will always experience periods of volatility, and weather and climate will remain an important factor, but stability is also visible in the futures curve, which is relatively stable as we look ahead. And now moving to our outlook for fiscal year 26-27. Starting with volume, we reiterate our commitment to deliver growth of 1% to 3% for the year. And we expect growth to be weighed towards the first half, with a strong start to the year, expected in the first quarter. In the second half, we face both a higher comparison base and the deliberate contract prioritization that we discussed earlier, particularly for Western Europe. On profit, we expect recurring EBIT growth of 3% to 5% in constant currency, supported by improved operating performance and productivity. At the profit-before-tax level, we expect significantly stronger growth of around 30% in constant currency, reflecting both the EBIT growth and the substantial reduction in financing costs. We expect to be below 240 million francs. We currently expect approximately 25 million of non-recurring operating expenses, primarily related to manufacturing network simplification and site consolidation. Alongside accelerated fixed cost productivity that I talked about and organisational effectiveness measures. Turning to cash and leverage, we remain firmly focused on deleveraging and we expect free cash flow of 200 to 300 million. And the delayed working capital impact from higher cocoa bean prices in age 2526 should be offset by the operational actions we are taking to further reduce the cash cycle. As a result, we expect net debt to recurring EBITDA to remain at, or below, 2.9 times, with capital expenditure of approximately 350 million. Our outlook assumes an average cocoa bean price of 4,000 pounds per ton. Taken together, 26-27 should be a year of delivering on our commitments. Continued volume growth, increased mix. Improved operating leverage, a significant step up in profit before tax, and further discipline on the balance sheet. Thank you for listening, and we will now move to the Q&A. Operator, please go ahead.

Thank you, Hein. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. And in the interest of time, please do limit yourself to two questions per person. Our first question comes from Matteo Linder from Vontabelle. Matteo, line is open. Please go ahead.

Yes, good morning, everyone. First of all, congrats on the numbers. My first question is on the Hershey contract and outsourcing in general. Could you remind us of which factories would be affected and the implications for these factories? And secondly, do you still see the trend for a return of outsourcing volumes from 2028 onwards, or did the Hershey event change your view? And my other question is on the targeted investments under the focus for growth strategy. Could you please quantify the required capex for the new greenfield in Indonesia and the expansion project in Canada? Many thanks.

Thanks, Matteo. Very clear. First of all, on Hershey and on outsourcing, you know, on the particular particularities around that, around, you know, the determination of the current contract and, you know, subsequent business after the determination of the contract, you know, when the contract comes to expiry by the end of 2027, at the moment we're discussing that. So I don't want to go in too much detail yet in terms of, you know, what sites are impacted and so forth. You know, these discussions are progressing. And I think I just wanted to underscore that we're very confident that it will not have any profit impact for us in 26, 27, nor beyond 27, regardless of the outcome of those discussions. So we feel very confident about that. And we will, of course, keep you very much updated if and when we come to that final agreement. Which we expect in the next couple of weeks. When it comes to outsourcing, you know, I don't think this particular contract, and again, this was a contract that, you know, that was started 20 years ago. It had a clear expiry date by the end of 27. You know, that's a reality that we live with. It has really helped us to build the business in North America, and it has helped Hershey as well. We've had a good, you know, we've had a good corporation and strategic priorities are, of course, always evolving. And if you look at the outsourcing market in general, I said that 2720, you know, I expect it to bottom out. And that's still where we are. So what we said in June is very much where we are today. And in fact, you know, what we're seeing is that there is a renewal on outsourcing coming through a couple of reasons. You know, first of all, the market is stabilizing. Things over capacity will come come down a little bit because of, you know, insourcing decisions that have been taken. Secondly, we are innovating, of course, and that's something that I'm very keen to do because that will always help us. Third, there is a lot of capital, of course, required in this in this business, and particularly when we look at the whole chain. And, you know, this is where we're really making quite a bit of progress. So, you know, I feel that it will become a growth lever again, but it will bottom out next year, as we as we said before, but it will contribute to our medium term volume guidance that we that we have given you in June. On the CapEx side, just one or two remarks. Look, I mean, we're guiding towards 350 million of CapEx max. That includes IT. You know, supply chain will be approximately 300 to 320 for this year. That includes the new site in Indonesia, and that includes the expansion in Canada. We won't give you precise numbers for each of those projects, but we're really keen now to progress on supporting volume growth in our priority markets in Indonesia. You can expect further news on Brazil in the months to come. And of course, you know, we want to continue to solidify our network in North America, both from a service and a quality perspective. And we're excited about the progress that we're making in Brantford. So, you know, this really fits the strategy. And I just want to refer back to the 350 guidance on CapEx overall. Many thanks. Thanks, Matteo.

Our next question comes from Ed Hockin from JP Morgan. Ed, your line is open. Please go ahead.

Hi, thank you for taking my questions. My first one's on volumes, please. So could you help us a bit on some more of the building blocks to your volume guides of one to three? Because I presume in Q1 you still, and you alluded to, have very easy comparatives, so I presume a strong quarter in Q1. You talk of this 1% drag from the Hershey transition and as well these Western Europe contracts fading out. Are you able to quantify the impact from those food manufacturer contracts in Europe on the volumes? And then also it looks as though end market volumes are still tracking down those single digits towards the end of your fiscal year. So what assumption do you have for the end market volumes progression in FY27? And then my second question, please, is on productivity that you mentioned. Are you able to give us some guardrails on the magnitude of these productivity savings yet? Or maybe to put it another way, I think in the last two, three years, you've had some significantly higher. Operating costs during the cocoa supply disruption, higher processing costs, new bean origins. I guess the question is how much of these higher operating costs are sticky and how much of this you expect to manage through this year and over the coming years with these productivity initiatives.

Thanks a lot, Ed. Two very clear questions. I'll start off and then hand over to Peter for some more detail. But let me first, on the volume picture, you are right. As we said, the first half will be a bit stronger in terms of the percentage growth than the second half. And that's amongst other because of last year, we were impacted by some service issues. And of course, we've had two consecutive quarters now, quarter three and four or 5.7% growth. So, you know, the comparable will be a bit stronger. But, you know, we're also entering the year with a bit more confidence, of course. Well, a bit with more confidence. We're having decent run rates on our gourmet proposition. So that all helps. But it is way towards the first half, with the second half, you know, being somewhat lower in the comparable. But when we look at the absolute numbers quarter by quarter, we expect a fairly even year. Peter will give you some of the building blocks in a second. On productivity, like you said, on productivity, we've seen increases over the last few years, and we're keen to, you know, the first focus that we've given in June on focus for growth was really to strengthen the fundamentals, you know, restore the fundamentals, quality, service, planning. You know, that for me was the focus, as well as the return to growth. Now we're seeing that happening, and of course we need a bit more time. It's now time to also add productivity to focus for growth and making sure that we leverage the P&L. So with the volume growth that's going to happen, we need to make sure that that fixed cost increase trend will stabilize and will essentially flatten and plateau for this year. And over time that we create more and more leverage to drive that profitable growth and margin accretion. So, the magnitude of what you're thinking of is, first, I would say we want to make sure that we drive flat costs in this fiscal year and then the fiscal year beyond. I'm not guiding yet towards a huge reduction. You know, we're working our way through, and we'll come back to you in January with a bit more news on the specifics. But flat fixed cost is what we're going to shoot for.

Yeah, maybe just a few more notes on the volume. As Heinz said, we're heading into a good start in the first quarter, which we're obviously happy about. We see some of the momentum on Goumet and on Western Europe continuing into that quarter. If I go a bit deeper, what we expect next year for the volume buildup is that the regions, AIPAC and LATAM, are likely to lead the growth. We expect fairly strong, especially H1, Western Europe and CE, and probably the fifth region would be North America. You've seen in the presentation that the market in North America is still very much under pressure. Prices have not yet come down, so that will be somewhat more challenged than some of the others. If I look at segments as such, Gourmet is going to be a strong year for us with the new prices and the new approach and other initiatives that we set in a few months ago. Food manufacturing, especially on the large customer side, we expect still a bit of pressure, again, back to the market, still, I mean, improving, but still being in negative territory. And cocoa, we believe it's going to be positive, considering that, again, the underlying demand momentum is picking up. In FM, as we said, you know, we do include, and that's included in the guidance, an impact on Hershey, which is 1% on the overall company growth.

Maybe one last remark on that end market. You know, I think that it's important. You know, about 45% of our sales in chocolate is on the chocolate confectionery market. And, you know, there we're still seeing a market that's overall a bit in decline. You know, in North America in particular, Europe getting a little better, and then the emerging markets in a plus. The remaining 55% of our business is, you know, and this is something that we're, as you know, we're very focused on, is where chocolate is an ingredient, but where we feel that there is a good market momentum. And that includes ice cream, that includes bakery, particularly in emerging markets, by the way, that includes the health and wellness side. So think of protein bars, but also granola type of products that are seeing increased chocolate momentum. So, you know, so 45% is traditional contractionary, but with the focus for growth strategy, we want to make sure that we continue to win in those adjacent segments that are a bit more attractive.

Thank you. Thanks a lot.

Thanks, Ed.

Our next question comes from Jern Ufert from UBS. Jern, your line is open.

Please go ahead. Good morning, and thanks for taking my questions. The first one would be, please, on the market trends you are seeing. What do you have been observing with your market intelligence going forward regarding private label versus premium, global brands versus smaller brands? Where do you expect the trends to be set here over the next two to three years, and how are you indexed to these trends at this point in time, i.e. how much work do you have to do to adjust to the new market dynamics? And the second question would be, please, on Gourmet, strong momentum. You have lowered your price points. I mean, the Horeca channel seems challenged across the board for many companies. I mean, what is the strategy here from your point of view for the next one or two years? Do you lower your price points like competitors? Are margins more on a pressure versus the history, or is it more a bit on the margins profitability that you are having the run rate of the historic, i.e., are you sacrificing margins for growth at the end of the day? Thank you.

Thanks, Jörn. Hey, a few points on the market and on the trends. You know, I think overall, and this is something that we said last time as well, but we see a bifurcating market, right? So you are right that particularly on consumer, we're seeing strong gains of private label. And, you know, we're working as one of the segments that, you know, that is an important one for us, for example, in Western Europe. We're working with a number of retailers on that. And often that is more affordability oriented. But, you know, to be very honest, also in private label, we see increasing premium type concepts. And, you know, that's something that we're working with. We're seeing that mainstream is a bit under pressure, for sure. But at the same time, premium continues to perform, to outperform the overall market trend. So, again, bifurcation, premium on the rise, but also some of the affordability projects. And on affordability, you know, we are increasing our capacity, for example, in Bransford in Canada, to be ready for compound solutions because the U.S. has switched in many cases to compound solution. In Europe, it's much more cocoa-butter-oriented and, therefore, premium-oriented for us. And then if you think about it, our gourmet segment, yes, we moderated our prices a bit to make sure that we're competitive, hence the 13.6% growth. But that is also helping us now into the new year when the long position that we had on the cost side, which is expiring, to keep the customers with us and to be part of their recipes going forward. So, you know, I feel very strong about the move that we have made in June and keep that market momentum. On gourmet in itself, like you said, I think there's a few points that I wanted to make. If you look at gourmet globally, for us, that is not just the high-end or the premium side that food manufacturers use. Gourmet is used in markets in many different ways. Let me give you an example of a big market for us, which is Brazil. There, our gourmet is almost entirely focused on home baking concepts. And we're seeing home baking increasingly taking off in some other big emerging markets as well. Gourmet in Europe is primarily for, you know, the independent chocolate, chocolatiers, restaurants, hotels, as you say, and actually there we're seeing quite a strong momentum at the moment. Our gourmet business in the U.S. is growing yet low single digit. But we believe that with GLP-1, and I talked about it in the Focus for Growth Strategy, you know, which has a volume impact of approximately half a percent. That's what we can see. But we're seeing a premiumization trend in the U.S. for those particular, you know, chocolate moments. And therefore, we expect gourmet to accelerate in the course of the year in North America as well. So the word gourmet is for us, you know, a certain channel. Yes, it's more premium, but the usage of chocolate is pretty local and has its own local dynamics. And I think, you know, we're very fortunate to have strong bases in around the world. And with that priority country concept that we've taken with four big emerging markets where we're investing in, we believe that gourmet will have its own role to play, I'll be it a bit different than what we've traditionally seen in Western Europe. A bit of a longer answer, but I hope that, you know, I wanted to give you a bit of context on Gourmet overall.

No, thank you very much. And if you allow me just one follow-up to the first question, which was potentially missing. In terms of the global brands versus smaller, local, upcoming brands, according to your market intelligence, where would you expect more growth to come for the next two to three years?

You know, I want to be a bit careful here because it's not one size fits all. You know, we're seeing some global brands doing really well and we're excited. And I think Peter said it as well in his part, you know, that we're seeing more innovation coming together with our global accounts. For example, the top seven accounts being approximately 30 percent of our total turnover. We've really resumed joint innovation programs. I talked about our joint program that we're doing with Magnum and Colworth, but, you know, without mentioning particular names, I see an increased appetite for innovation. So that's something, of course, that I'm really excited and happy about, that we can again play that role and then be a reliable service provider to those accounts. So I just want to be a bit careful to sort of give a one-size-fits-all answer on this one.

Thank you very much.

Our next question comes from John Cox from Kepler. John, your line is open. Please go ahead.

Yeah, good morning, guys. Thanks for the questions and answers. I have a question just on the more going into FY27. I think you said previously that it would be maybe a year of transition. Volumes are still under pressure. A lot of people are sort of insourcing for a while until the factories are full up. But when I look at the dynamics of your business, you know, 4% growth in food manufacturers in Q4, you know, double-digit growth in volumes in gourmet, I'm just trying to work out, you know, what the drivers are and is it share gains or, you know, why is it when we can see that volumes for the overall chocolate market are under pressure that your volumes are doing a bit better? As part of that, the second question would be, well, if your gourmet business is growing so quickly, your manufacturing business is, you know, at the moment around 4%, and you're talking about good momentum into the first quarter, why is your guidance for EBIT, recurring EBIT, only 3% to 5% when, you know, if you're growing 1% to 3% with all the mix impact, the gourmet particularly, you would think your EBIT would be growing actually faster, even if you have other things going on. So that was the two questions, if I can. And then just a technical question on the Hershey contract. You mentioned no impact on EBIT. Is that because it was a very low margin contract and you've just got a little bit of – you can do a little bit of operational improvements to offset that low single whatever it may be in EBIT? Or are you saying that actually the EBIT contribution of a Hershey contract is zero in terms of Swiss franc for you? Thank you.

Thanks, John. Very clear. Let me go first on the volume side and some of the comparables, then hand over to Peter on the EBIT, particularly versus profit before tax, because I think that's very important to continue to see those in conjunction. But Peter will give you a bit more details on that, and I'll come back on Hershey. So first of all, on FY27, a few points. You know, are we gaining share? Answer, yes. You know, we are. So, you know, and I think it's very important. We talked about this in June. I felt that, you know, when we would... Get back to better delivery, better service, ensuring a consistent quality, this company can definitely perform, you know, and so we are taking share. So that's number one. Secondly, the comparable, certainly in the last quarter of, you know, our previous fiscal and the first two quarters of the next fiscal is a bit easier. And of course, we're going to see those comps of 5.7% growth and 13.6% growth in gourmet in the second half of the next fiscal year. So we're benefiting a bit from that. And the third reason is, you know, if you think about it, and I mentioned this before, 45% is traditional confectionery, so you relate it to the chocolate market, but 55% of chocolate sales in itself is to adjacent markets. And you've seen probably the volume growth of some of the large ice cream companies in the last couple of weeks when it comes to, you know, the results that they have reported on. And of course, that's something that we benefit from as well. The same goes, by the way, on bakery solutions in emerging markets, you know, we're seeing positive developments on that in India, we're seeing very strong growth in China on that. And, you know, that's that. So, you know, our sales, as I said, you really need to look at the combination of different categories and not just at the confectionary category. Um... Peter, on EBIT.

Yeah, on EBIT. John, obviously a good question. I think we do need to look at PBT as well. We're guiding PBT at plus 30% for next year. And the big thing to discuss here is financing cost. Last year, we decreased our financing cost by 70 million. You know that most of this gets passed on through EBIT, so it mechanically lowers EBIT. Next year, same thing. We will be reducing our financing costs from 307 to below 240. So that's 70 million that sits as a saving between EBIT and PBT. And a big chunk of that 70 million actually gets no longer passed on to customers. So that's a mechanical significant decline of EBIT. So that's really the first thing to say before we start bridging EBIT in general. There is a big negative because of the lowering finance costs, which at the end of the day is a very good thing. So if I go one step further, then... If I take that out, there's a few moving parts beyond that, of course. We have a bit of a volume momentum, as you mentioned, I think, and the mixed momentum as well coming from Gourmet. That's a positive element. So Gourmet profitability will be much better. You will see chocolate results improving into the next year compared to the last year. On the other side, we will see some cocoa normalization. We have talked about, you know, very strong pressing margins and us benefiting from some of the volatility that we've seen in the market. And there's more opportunity to do that when you have markets which are a bit more calm. So that's a component that is offsetting that. But honestly, those are the big moving parts. But really to keep in mind is this 70 million reduction of finance costs that mechanically pays negatively on EBIT is neutralizing on PBT, which is why our PBT goes up by 30 percent.

On Hershey, as I said, John, at the moment, I want to be careful not to add more specifics because we're talking about, you know, how that business between Hershey and ourselves will look like beyond 27. But we felt that it was appropriate and transparent, which, of course, is what we want to be. And, you know, giving clear commitments and sticking to them, you know, to you today, because it will have an impact of 1% on volume in this year. But we're very confident that indeed there will be no profit impact. And what we feel that the outcome of the negotiations that we're having will also not have a negative profit impact beyond 27. I don't want to comment too much further, but overall, the profitability, indeed, as you say, this was certainly not accretive for us, but I'd like to leave it there. And we will update you, of course, on the final conversations that we have, if and when appropriate, and when that's done.

Thank you.

Our next question comes from Charlotte Green from Barclays. Charlotte, please go ahead with your question.

Thank you, and thank you for taking questions today. I just wanted to touch on the PBT growth guide that 30% is broadly, seems to be underpinning consensus. Beyond the reduction in finance costs, what kind of the key moving parts and risks delivering that level of PBT And we'll see the growth mixture.

Yes. On the finance cost, so we will bring it down from the current 312 to 240. So that's the 70 million I talked about when I was answering John's question. So we are further, I mean, deleveraging again is very much on our agenda also for next year. So we will continue to pay back our debts that we have. There is, we have a, our maturities basically are quite well spread across the different coming years. And that's going to be part of what we do next year. You might also remember that we paid back 849 million bonds at the end of last fiscal year. The benefit of that obviously will come in a lower interest costs and financing costs also in the course of fiscal 27. So that's why we'll keep it down. Apart from that, I mean, we took lots of measures in the course of the last year and a half to make sure that we are less exposed or vulnerable to spikes and volatility in the cocoa market. We've talked about the letter of credit that we've had, that we have implemented now, that protects us into short-term swings. We have the borrowing-based facility that basically makes our funding a lot more valuable to the level of the bean price and the level of the value of our inventories. All of these measures, together with operational things that we've done, and operational things in the sense of we run on much lower inventories, We make sure that we source, you know, wherever the biggest economic value is on the bean. And in many cases, in some cases, that's Ecuador. Other cases, that's Africa. But with the flexible blending, we can shift that to the highest economic value. All these things, operational and financial, make also that, you know, we need less working capital to work in the environment than we needed a year and a half ago. So all of these things that I mentioned keep our cash requirements down, keep our debt down, keep our finance costs down.

Next question.

Our next question comes from Samantha Derbyshire from Goldman Sachs. Samantha, your line is open. Please go ahead.

Good morning. Thanks for taking my questions. Just wanted to start on cocoa supply. Can you just talk us through – you said you're observing the weather impacts from El Nino. Can you just tell us what you're actually focusing on and what timeline you're thinking? At what point do you feel that we get a really good idea of what the upcoming crop is actually going to look like? And could you perhaps quantify what you actually expect for this year's deficit? I know you said that over the cumulative two years, you still expect there to be a surplus, including last year. But for 26, 27 specifically, how are you thinking about that crop? And then my second question is kind of coming back to some of the discussion you've already had on innovations, just trying to get an idea of, you know, if there's specific categories or regions where you're seeing real step-ups in innovation. You know, you've mentioned private label in Europe and bakery and emerging markets as being good growth drivers, but maybe just a little bit more clarity around what you think customers are trying to really pin their expectations for volume growth coming through one, If there's any clear trends driving that. Thank you.

Thanks a lot, Sam. A few points on cocoa supply. So first of all, what we're seeing is a delayed crop. You know, normally, and I was in West Africa actually a couple of weeks ago, normally you would see the crop really coming through already in, you know, by the end of in October. But, you know, we're really seeing a delayed crop. El Nino, as you mentioned, what it does is causes a lot of drought in West Africa. It could cause a lot of rain in Latin America. And particularly, we need to understand if there is enough precipitation in West Africa during these weeks, so the last couple of weeks and this month. So that's something that we're taking a very close look at, and we're having a lot of people on the ground who really keep us updated almost week by week. So we're very, very close to this. And we do expect a reduction of the crop this year. I would say in West Africa, we're looking at reductions of somewhere between 20% and 25% overall. But that is not the full picture on a global basis, because in Latin America, we're actually seeing good increases. If you take West Africa, you would be talking numbers of around 400,000 or 500,000 tons. But then there's compensation. Some compensation in Ecuador actually so far had a very strong crop. So on a global basis, it's probably less than that. But what is important, though, is that the surpluses, as I mentioned, over the last two years, plus the deficit that is now coming, you know, we feel that there is no reason at the moment that the cocoa price in itself will go out of that bandwidth that we talked about of 3,000 to 5,000. In fact, we're seeing quite some stability there. We're also seeing that many have covered, you know, there's a nine-month coverage globally in the market, which also points to some stability on pricing and, you know, around £5,000 per tonne is roughly priced in what we can see on a global basis on consumer prices. So, you know, we feel that there is, you know, that further price hikes. Again, that's not our decision, but it's probably somewhat unlikely. So I hope that gives you a bit of a feel on the overall market. Then on innovation, yeah, as I said, we're obviously very excited about Flavor Code. That's coming. The first deliveries are coming in November. That's still very small. We aim to ramp up next year in February. So we've asked our customers to sign up after our launch last week in Antwerp, Belgium. And I'm very, very excited that it got such a phenomenal response, but that we're seeing an enormous positive customer response to this. You know, I feel that overall innovation in chocolate has been a bit low for all kinds of reasons over the last year. And what we've been focusing on and focus for growth is to do fewer things. But make them really much bigger. And Flavor Coat, which is standing, you can't see it, but it's standing here next to us, yep, now it's on camera, is definitely an example of that one that we can actually scale. And this one is innovation on the premium side and on the gourmet side, unlocking, you know, great new flavors. It's really an outstanding product. So that's on the premium side, and there's a lot of demand for that. At the same time, as I said, on cocoa coatings, so compound solutions, is the other one. There we are driving what we call Coco Max, which is a more enhanced compound solution. And particularly in North America, we're seeing that many of our customers have not switched back after the cocoa price increases from, you know, that caused a switch from butter to compound solutions. And, you know, that seems to be sort of the taste that people want to go with. And therefore, we're really investing in that. The smaller innovations, and we, of course, talk about that, like cocoa replacement opportunities, like cell culture or, you know, these play a role in our portfolio. But I would not point them as being super, super big. The same one, for example, organic. You know, I've been watching this for a bit, also given, you know, the background and other industries. It's sort of there, but I'm not seeing that become very big. So you really have to think about it in terms of premium and making sure that we make affordability solutions really tasty and good. And that's what we're focusing on the most.

Next question. I think it's Tom. Our next question comes from Tom Sykes from Deutsche Bank. The phone line is open. Please go ahead.

Tom, are you there? Tom, please go ahead for your question.

Sorry, apologies. Morning, everybody. Sorry, just firstly on inventory levels, either at the wholesalers for the gourmet business and at your larger FNCG businesses, where would you put the inventory levels that you think they're holding relative to history and how much of your volume growth either in? The second half of this year, first half of next year, is sort of some degree of restocking. And then just on the ice cream business, just interested in when you actually sell in to the ice cream producers, because would a warmer summer in Western Europe have actually impacted your volumes in the ice cream business? This year, or is that something that you would expect in maybe the second half of the calendar year or the beginning of your first half, that there's sort of some replenishment of stock building? And then I believe that the peak level of production is... It's near a sort of January-December time, December-January time. Is that when you expect a real improvement of sort of ice cream-related activity? Just interested in how that fill in differs to maybe other FMCG producers, please.

Thanks, Tom. First question on inventories, going to Peter.

I'll take that, Tom. Thanks for the question, Tom. So on inventories, just a few points. I mean, I get a lot of questions on, because we talk about cover, and that's that customers are nine-month covered, nine-months covered, but that's obviously very different than inventories, because that's contracting out, you know, ahead of time when they feel the bean price is at a good level. So, for instance, now we see that some industrials are covering more When the bean price ticks to 4,000, we close contracts a bit longer. But that is not the inventory as such. If you look at inventory, as an overall statement, I think we've seen a bit of a reduction. I mean, probably less than what we're doing. All these CFOs are focused on working capital more now than two years ago. But really, to your question, we don't see a lot of stocking up as an explanation of our results in Q4. We've seen some in Coco. We saw that happening at the end of the quarter, but across the other sides of our business, there's no significant impact that we expect, so also not in terms of Q1, in terms of destocking.

On ice cream, yeah, Tom, I think, I mean, you're right. I mean, the, you know, the preload, so to say, for the season for us is primarily, you know, those months around January, February. So, you know, that's when you stock up, but that's sort of for the normal inventory that they want to have, for sure. At the same time, what we've seen in Q4 for us in particular was because of the, you know, the hot summer and because of continued strong performance of the ice cream companies that we, you know, You know, you need to sort of continue adding. So ice cream in itself has been a real help for us in terms of volumes in Q4, no doubt. So we've, you know, we've, you know, continued to deliver because they, of course, needed to continue their production. How that's going to work? Of course, next year, you know, we believe we have a strong position in ice cream, not just on chocolate, but also in the combination of some of the specialties. So we're really looking forward, you know, to continue to work with them on, you know, some of the innovations that we're currently developing and making sure that we can add that in December, Jan, and FAB. But of course, how that's going to play out in terms of volumes next year, you know, related to weather and hot summers there, I want to take a bit of prudence.

Good. Thank you. Sorry, just in the follow-up, are you able to say across all customers how big ice cream is for you on a sort of full-year basis and maybe anything on geography of that, please?

We have not given, I think, a particular number on ice cream how big it is for us. You know, Let me come back to that, Tom, overall. I mean, I want to say is that for us, ice cream has been overall has been high single digit growth for the full year. And it's meaningful in our total basket. And we work with everyone, by the way, so that I could say we work with, you know, if you take the top 10 ice cream producers globally, we have a role to play with all of them. Some more strategic and some more, you know, tactical, but we're working with all of them. And this is clearly a segment that we continue to want to win.

Okay, perfect. Thank you very much indeed. Thank you.

We currently have no further questions, so I'd like to hand back to Hain for some closing remarks.

Thanks, everyone, for listening today and for watching our full-year results. We really appreciate the interest in the company, and in the next couple of days and weeks, both Peter and I will talk to quite a few of you on an individual basis or with groups. We enjoyed conversations. We're walking into the new year with more confidence, more focused, You know, and clearly with a desire to stick to what we what we promise and what we commit to. Thanks for watching and speak soon. Thank you.