Barry Callebaut Volumes Improve, Cocoa Risk Returns

Research evidence excerpt

Barry Callebaut Volumes Improve, Cocoa Risk Returns

iffering cocoa price

assumptions in figure 3. Following the extreme volatility of recent years, this sensitivity is now

far more visible to investors and, in our view, remains one reason Barry Callebaut is unlikely to

return to historical peak valuation multiples or close the valuation gap versus premium

ingredients peers such as Givaudan, where cash generation is materially less exposed to

commodity-driven working capital swings. Importantly, the cocoa price risk is not limited to

balance sheet volatility. A key component of the recovery case assumes lower cocoa costs

ultimately support lower on-shelf chocolate pricing and a gradual recovery in consumption. If

cocoa prices remain elevated or continue to rise, that expected easing in consumer pricing may

not occur, potentially slowing both end-market demand recovery and Barry Callebaut's longer-

term ambition to rebuild ROIC.

Still not cheap: The Focus for Growth plan is directionally credible, prioritising execution and

customer service following a period of disruption. Management’s medium-term framing and

confidence that profitability can recover to FY19 levels on PBT/t offers some reassurance.

However, in our view, consensus already embeds a strong FY27/28 recovery, while limited

visibility on key drivers, particularly Gourmet, constrains conviction. Cocoa volatility also

continues to pose risks to cash flow and the pace of deleveraging. Against this backdrop, we

think valuation looks demanding. The stock trades on 22x FY27 P/E and 18.6x FY28 P/E, which

does not appear compelling given the execution risk. We update our PT to CHF980 (from

CHF1020) on lower FCF forecasts which implies a FY28 PE of 15.5x on what we would consider to