Lindt & Spruengli has booked a 14% rise in first-half net profit in the face of weak consumer sentiment in the chocolate-maker's largest markets, the US and Europe.
The Swiss chocolatier said today (21 August) net profit rose to CHF36.6m (US$37.8m) during the six months to 30 June. EBIT climbed 16% to CHF48.7m, the group added.
Lindt said it was able to grow its market share in all of its main markets, although value and volume sales in the US and Europe remained flat as consumers cutback their spending in the face of "economic uncertainty". Sales were up 2.6% to CHF1.03bn. Excluding currency exchange, sales rose 5.3%, the group added.
While Lindt said the economic outlook is likely to become "more challenging" in the back half of the year, the firm reiterated its medium to long-term targets of sales growth of 6-8% and profit growth of 20-40 basis points.
Click here for a round-up of what analysts made of Lindt's numbers. Click here for analysis of its results and a look at what could be its priorities in the months ahead.
- Above-average organic growth reaches 5.3% or 2.6% in Swiss francs
- Market share gains on all main markets
- Substantial increase of operating profit (EBIT) by 16%
- Confirmation of strategic growth and profit targets for the year as a whole
Kilchberg, August 21, 2012 - With sales and profit figures well above the market average for the first half of the year, Lindt & Sprüngli has got off to a good start in 2012 and succeeded in gaining market shares on all the main markets.
Against a background of increasingly severe government debt levels and the accompanying subdued economic performance, market conditions in the first half of 2012 were once again anything but straightforward. The main overall chocolate markets in Europe were still flat in terms of both value and volume. At the same time, consumer sentiment remained rather weak and even deteriorated further, especially in southern Europe. In North America, too, consumers proved increasingly reluctant to spend money because of the prevailing economic uncertainty.
Compared to the same period in 2011, the euro has once again lost a little ground against the Swiss franc. This continues to place serious challenges on Switzerland as a production site from which LINDT chocolate is exported to more than 80 countries. In order to remain competitive on the international markets, Lindt & Sprüngli constantly takes new measures designed to alleviate the cost disadvantage through efficiency gains and volume gowth.
On the commodities side, cocoa bean prices settled at a slightly lower level than in previous years after a good world harvest. On the other hand, prices of milk, sugar, and nuts remained stubbornly high.
Retailers continue their efforts to gain a price advantage through intensified promotional activities. With its established traditional products and constant innovation, Lindt & Sprüngli is consistently emphasizing the premium positioning of its brands, and only takes part in price-promotion campaigns to a very limited extent.
As of June 30, 2012, Group sales reached CHF 1.033 billion. Given the rather difficult market situation in Europe and North America, this represents good organic growth of 5.3% compared to the same period last year, with a further gain of substantial market shares.
Particularly good progress was made on the key markets of Germany, France, and Switzerland. Lindt & Sprüngli's growth in North America reached 6.7% in local currency terms. The LINDT and GHIRARDELLI brands both contributed to the strong advance on the Group's biggest market, the USA, and also in Canada. The impressive inauguration ceremony of a GHIRARDELLI retail outlet in the refurbished Californian 'Disneyland' leisure park at Anaheim in June merits a special mention. This new point of sale will help greatly to create a higher profile on the North American market for GHIRARDELLI, the second prominent brand name of the company in the USA.
Innovative ideas for the creation of new events with premium chocolate as a gift item gave a lasting boost to business. For example, Lindt & Sprüngli became the market leader in Switzerland and Canada for Valentine's Day. In Germany, the start of spring saw the successful launch of a FROSCHKÖNIG (Frog King) range, while new recipes in the unique CHOCOLETTI format added an innovative touch to the start of the summer season.
Geographical expansion continues to proceed: the newly-incorporated subsidiary in the Peoples' Republic of China opened for business on August 1, 2012. This gives Lindt & Sprüngli an additional presence on the dynamic Asian market which still has high potential for the future. In addition, two more LINDT Chocolate Cafés were opened in Tokyo. Development of the subsidiary in South Africa is promising. A LINDT boutique with an attached 'Chocolate Studio' was inaugurated there in April 2012.
Public interest in the LINDT 'Chocolateria' in Kilchberg, where courses and activities of all kinds on the theme of chocolate have been organized regularly by the LINDT Maîtres Chocolatiers, since the ceremonial inauguration in November 2011 by brand ambassador Roger Federer, surpassed all expectations. This innovative communication format provides an ideal platform for making a wide audience much more aware of the LINDT passion, know-how and brand values.
As of June 30, 2012, the operating profit (EBIT) stood at CHF 48.7 million, equivalent to an increase of 16% on the same period last year. The accompanying rise of 50 basis points in the operating profit margin exceeds the medium to long-term target. At CHF 36.6 million, the net income was 14% higher than at the end of June last year (CHF 32.1 million). At closing date, operating cash flow amounted to CHF 159 million (June 30, 2011: CHF 228 million). The reduction versus same period in 2011 is primarily explained by higher raw material inventory. The main reason for the decrease of the net cash position standing at CHF 416 million (December 31, 2011: CHF 486 million) is the ongoing share buyback program which is progressing rapidly. As of June 30, 2012, shares and participation certificates representing 4.62% (out of a total target of 5%) of the corporate capital had been bought back. The program should therefore be completed on schedule by the end of the year. At the Shareholders' Meeting of April 26, 2012, the decision was made to cancel 3,300 registered shares and 53,000 participation certificates already repurchased with a corresponding reduction of the corporate capital.
Outlook
The euro crisis and general economic background conditions seem likely to become still more challenging in the second half of the year with consumer sentiment further impaired in a number of countries. Despite these difficult conditions, Lindt & Sprüngli is adhering to its medium to long-term sales and profit targets, and for the year 2012 as a whole expects to achieve organic growth in local currency terms of between 6 and 8%, with an increase in the operating profit margin of 20 to 40 basis points. The continuous gain of new market shares on key markets and geographical expansion into growth markets will remain the topmost priority. In addition, emphasis will be placed on further intensification of the marketing and advertising activities.
