Barry Callebaut AG

Good morning, ladies and gentlemen, and welcome to Barry Callebaut's half-year results 2022-23. It's a pleasure to welcome you here at the sixth convention point. Given the change in management which you have seen this morning, we have slightly changed the setting for today. So the meeting today will be hosted by Bender Shriver, our CFO, but we will also have our new CEO, Peter Felt, here who will quickly talk to you on stage in a few minutes. Let me just quickly do the housekeeping before we go on. So please be reminded that the information given during this call conference contains some forward-looking statements which reflect the best of our current knowledge. Actual results may be different. Furthermore, we would like to inform you that the webcast and the conference is being recorded. As said, we have a slightly changed agenda for today, which is also slightly shorter, and will all be presented by Bender Schreiber. But before we start with the half-year results, we have Peter Felt, our new CEO here, who wants to say a few words to you. Thank you.

Thank you, Claudia. Good morning, everybody. It's a great pleasure being here with you, and so allow me to say a few words given the just-announced changes. Over the past few weeks, starting as the CEO of the Jacobs Holding, I had the chance to learn about Barry Kalibao and also met several of the board of directors of Barry Kalibao. And so when Peter Boone announced that he would want to step back and focus on his family life for personal reasons, the board of directors approached me to consider assuming the baton from Peter, which I happily do. For me, joining Barrikalibau is coming full circle. Fifty years ago, I had my grandmom run her hustle store in Germany, in our hometown in Gummersbach in Germany. Since that time and throughout my career, I had the opportunity to work on many food and beverage brands. During that time, I also worked on several and with several of Barik Kalibao's customers and their diverse consumer base around the world. I sorely enjoyed during that time working with natural food products, oranges in the beginning of my career, coffee that went through various stages and now chocolate. Across all of these businesses, developing the brand and their relevance to our customers was absolutely key. As you will have seen in the announcement, in my previous CEO roles, the past two steps that I had in my career, both were KKR-backed companies, we managed to step-change sustainable growth and lifted both companies onto their next lifecycle. Barry Kalibaugh is the heart and the engine of the chocolate and the cocoa industry. That is a fantastic and very powerful purpose statement for us as an organization. It gives us guidance and direction to deliver sustainable growth for all of our stakeholders. So joining Barri Kalibao is really close to my heart. It's a great honor and I truly look forward shaping the next chapter with all of our employees at Barri Kalibao. Over the next weeks, I'm looking forward to meeting all of the people that are making it happen, from cocoa sourcing all the way to servicing our customers. I'm keen to learn about our culture, what works well, and what we can improve. So naturally, you will have questions to me today, but I do hope that you understand that I first want to spend time with my organization and the team at Barik Kalibao and learn about us as an organization, as a company. So thank you very much. Over to you.

Thank you, Peter. Dear ladies and gentlemen, welcome to our half-year results 2022-2033 presentation. Let's talk about the results. In the first six months of the fiscal year, we delivered strong profitability, reflecting the strength of our business model which includes continued cost leadership in a highly inflationary environment and good product mix. Sales volume recovered progressively in the second quarter, limiting the overall volume decline for the half year to minus 2.9%. Volume recovery was slower than expected, due to the temporary limited availability of our global brands in the first quarter and weaker than expected customer demand in high inflationary environment in the second quarter. Operating profit was strong and increased by 11% in local currencies and net profit increased by 10.4% in local currencies compared to the prior year recurring numbers. Cash flow generation remains solid despite increasing raw material prices and adjusted free cash flow amounted to 71.2 million Swiss francs. I will share with you some details in a few minutes, but let's look first at the highlights. You will be very familiar in the way we present our volume growth on a quarterly basis for cocoa and chocolate. As set in chocolate against a high competitor, we witnessed gradually recovering volume growth, albeit slower than expected in the second quarter. For the half year excluding the wheezy ramp-up effect, our chocolate volume performance was in line with the underlying chocolate confectionery market, according to Nielsen. Volume of global cocoa was back at normalized level in the second quarter, leading to about flat volumes for the first half year. Now let's have a closer look at our key growth drivers on the next slide. All key growth drivers supported the volume improvement in the second quarter. After a flat volume in the first quarter, outsourcing volumes grew by plus 3% in the second quarter. Emerging markets volume also turned positive in the second quarter, limiting the volume decline after six months to minus 1%. And Gourmet volume growth in the first quarter suffered from the limited availability of our global brands as an aftermath of the VISA ramp-up. The second quarter, however, showed a clear improvement against a strong competitor in prior year. Let me now share with you some words on the outlook. For the second half of the year, we are confident to deliver continued strong operating profit. Due to the delayed volume growth, we now forecast the volume to be flat to modest growth for the full year 2022-2023. We now expect average volumes growth for the three years prior to land below 5%, with an EBIT strongly outperforming. At Barry Callebaut, we have been and will remain very consistent on our long-term strategy, which is based upon our four strategic pillars, which you are very familiar with. We confirmed today our new mid-term guidance for the three-year period 2023-2024 to 2025-2026. Now let's have a look at the financial results for the half-year in a little bit more detail. In the first half-year, we see a mixed picture in the different regions. In region EMEA, volume in the first quarter was impacted by the residual effect of the VISA ramp-up, In the second quarter, we have seen volume picking up well ahead of the declining underlying chocolate confectionery market, in particular in gourmet and specialties. This was thanks to better availability of products and supported by growth in Western and Eastern Europe against a double-digit competitor in prior year quarter. Operating profits EBIT has been strong, up 10% in local currencies. Volume in region Americas continued to decline in the second quarter in an overall soft market environment, and against high competitors of the prior year. Food manufacturers was impacted by a more cautious environment, leading customers to prioritize destocking, in particular in the first quarter, and continued to delay orders, which led to lower than expected volume in the second quarter, particularly in the first quarter. While volume was negative, we continued to focus on the value-adding mix, supporting the strong profitability. Volume in Asia-Pacific remained about flat during the first six months of the year against a challenging competitor and a difficult economic environment. We continue to see positive volume growth in food manufacturers, however. Gourmet and specialty volumes steadily improved in the second quarter, limiting the decline in the first six months to mid-single digits, supported by the growth of local brands in markets like India and Indonesia. The ripple effects of COVID still weighed on China. As a major market for gourmet in general, EBIT improved substantially, benefiting from a more favorable market. still led to a negative volume effect in a half-year gross profit. However, this was more than compensated by the strong product mix effect and the positive contribution from our cocoa business. The strong positive mix effect was supported across all regions and was the result of successfully passing on inflationary price environment in the industrial business as well as in the gourmet price list. At the same time, we continue to focus on value-adding mix and focus on the most profitable volumes in FM. Overall, gross profit increased by 11.4% in local currencies, while currencies had a negative effect of minus 11 million Swiss francs. I know we have some issues with the slides, but let me take a look now at the key raw material prices and the combined ratio. Here we have the slide. As you know, the combined ratio shows the relationship between the market prices of cocoa butter and cocoa powder in relation to the underlying cocoa bean price. It is a forward-looking curve. Results are normally seen over a six to nine months period. Please be reminded, that the combined ratio only gives a broad indication for the industry. It does not reflect many variables such as the terminal market structure, price differentials, including the living income differential, and the forward pricing structure and customer coverage. Having said that, the combined ratio remained fairly stable at 3.5 times the market, compared to 3.4 times in prior year. This was a result of rising cocoa butter prices, while the cocoa butter prices are somewhat lower. Looking at the price developments of our key raw materials, you can see that the cocoa bean prices have recently started to increase and closed on February 28, 2023, at 2,129 British pounds per ton. Sugar prices in the EU continued to do a strong increase with 83.4%, while the world market price for sugar was more range-bound with an increase of 5.3%. Dairy prices, on the other hand, corrected, showing an average decline of minus 6.1% compared to the prior half-year period. Thanks to our cost-plus model used in the majority of our business, the volatility of the raw material prices normally does not affect our profitability. However, it has an impact on our working capital, and we will get back on that later on. Now, let's take a look at the operating profit bridge on this slide. We delivered a strong EBIT increase of 11% in local currencies compared to the prior year EBIT recurring. Gross profit contributed an additional 69 million Swiss francs, while SG&E and others increased by minus 34 million Swiss francs. As we have gone through an increasingly inflationary environment that on the one hand we can pass on as part of our cost plus, but is still visible in our overall cost structure. Compared to a year ago, when we were just coming out of COVID, we also have increased our promotional brand activities like the World Chocolate Masters and a lot of travel activities. Currencies had a small negative impact of minus 5 million Swiss francs, leading to an EBIT reported of 348 million Swiss francs. The next bridge shows the development of EBITDA to net profit for the half year. Financial items were somewhat higher at minus 60 million Swiss francs due to higher benchmark interest rates. Income tax expenses increased to minus 54 million Swiss francs, corresponding to an effective tax rate of 18.7%. The increase in effective tax rate was mainly driven by less favorable geographic mix of profit before taxes, resulting in a net profit increase of 10.4% in local currencies compared to the prior year recurring. I am pleased with the continued solid cash generation, despite the impact of price inflation on the working capital. Working capital increased by 100 million Swiss francs as a result of higher receivables and inventories amidst the raw material price inflation. Inventories in addition increased due to the early harvest of main cocoa bean crop. The effects were partially offset by higher payables. Interest and income taxes paid amounted to minus 88 million Swiss francs, up from minus 68 million in the prior year period, due to higher benchmark rates and increased taxes. We continue to invest in our capabilities, which enabled future growth. However, we also chose a prudent approach in the current market environment, reflecting a slightly lower capex of minus 96 million Swiss francs. The reported free cash flow amounted to minus 188 million Swiss francs, while adjusted for the effect of cocoa beans regarded as RMI, the adjusted free cash flow continued to be selled at plus 71 million. Net debt, compared to the prior year February, remained about stable at 1 billion 581 million Swiss francs. Looking at the adjusted net debt, considering the cocoa beans in inventory as RMI, the level was further reduced by minus 193 million to 368 million Swiss francs. Let me finish the financial review with some of the key ratios. Our ROE improved compared to February 2022 with 130 basis points to 12.7% on the recurring view. On the ROE recurring, we improved our ROE to 16.1% with 100 basis points. And with that, ladies and gentlemen, I conclude this presentation. And I would like to open the floor for questions. Operators, please instruct the participants accordingly.

We'll now begin the question and answer session. Anyone who wishes to ask a question, we press star and 1 at this time. You can also submit your questions in the webcast field.

Okay. Hi, Pascal. Hi, Pascal Boll from Stifel. A few questions. So first of all, on volumes, after you were very upbeat on the growth acceleration in H2, now you guide for the full year for flat to modest growth. First of all, what changed? And secondly, what should we expect in terms of trajectory there in Q3, Q4? Q4, you have a low base, but is it fair to assume that Q3 will also be probably more towards low single digit? That would be my first question. And then EBIT was very strong in H1. Maybe we have seen a 30% increase in COCO in EBIT year over year. What is behind there and how sustainable is that profitability increase? And if we look... into H2, how should we look there in terms of profitability? Do you expect a similar profitability? Will there be also a positive mix effect in H2? Maybe that one. And then finally, for the new CEO, you know, I mean... we have we have seen new midterm targets announced in q1 that was all under the old management or under the new or under the old ceo what is the risk that we see further adjustments in the next few months there and how committed are you to that strategy

Let me first answer quite a bit of questions, so I'll let you think a little bit about the last question. First of all, on the volume side, it is a gradual improvement, but to be fair, we saw a slower-than-expected Q2, and that made us change the outlook for this fiscal year than positive, but it's a gradual improvement that we see quarter after quarter. We saw a prolonged effect in the Americas, where the recovery was not as fast as what we expected. We saw a slower demand, delayed orders after the destocking effect in Q1. And that made us now change the numbers, while before, in the last quarter, we were still committed to the full year demand. to the mid-term guidance but overall you can see it already in the numbers as well it is starting to gradually improve and that's going to be a continuation we have all the means to further the model works our long-term model is a model of growth and that's something that you will continue to see in the second half as well On your second part, on EBIT as well, first of all, our H1 EBIT was positively affected by COCO. It was stable. Remember that last fiscal year in H1, we had a poor performance linked to market conditions. in the cocoa market. Second half was much better. Now our H1 is more in line with our H2 of last fiscal year. And we do see a continuation of that going forward. So how sustainable is our profitability? It is sustainable. We are on a track record. We have a proven long-term strategy in terms of driving mix improvements as well. And that's something you see in our current result. That is actually, of course, we are projecting going forward as well. That's why our confidence in our new midterm guidance as well. We gave a strong indication there that volume growth 4% to 6%, but at the same time we said our EBIT should grow 8% to 10% in our new midterm guidance. I will not pin myself to specific quarters, that's very difficult to model, but what I want to see is gradual improvement of our business in this fiscal year, given the very tough market circumstances at the moment as well. I don't know whether you want to add something.

I think you explained a lot already. I mean, I'm three hours in, so I hope you have appreciation for me not taking a position on that at this stage. I can just tell you that we have a fantastic business and a fantastic foundation, and I'm really looking forward to weighing in on that.

Thank you.

Hey, John Cox, Kepler Chevrolet. We'll just add to that. So, Peter, so you're not committing at this point to the new financial target. I know you've only been in a few hours or days or so. But maybe as an ad, you added that in some of the businesses you've been to, you've actually typically engineered a step up. sustainable step up. Just wondering if you could talk a little bit more about the ambition, maybe not necessarily the financial metrics. That's the first question. Second question, just back to the improvement in profitability. There seems to be a lot of doubt that that is actually possible to keep up in the future. The gross margin gains is about 90 basis points on the year. Is it right to think that around half of that is the combined ratio? improvement, is that a good guess? And the second part of that would be, can you give us some examples of what you're doing? Again, there's a lot of questions I had today saying, well, what are they actually doing in food manufacturing to get that?

So first of all, on the cocoa side, you see, of course, combined ratio, it gives you a good proxy on the profitability of the business. But also it's linked to we had more difficult marketing environments before. Remember, when coming out of COVID, the overall demand for cocoa butter was quite depressed, was under pressure. There was a lot of availability at that moment. That now turned back around. Overall, the profitability of the business improved. And also the cost factors. Remember all the supply chain issues that were there in terms of international shipping as well. That has turned positive now as well. So that's the main contributor to the result. But overall, in food manufacturers itself, it is mix-driven. It's product mix-driven. It's still... Yes, uncertain circumstances, a highly inflationary environment, but our consumers, the end users, are still demanding the new on-trend items. We have not seen a slowdown in our sugar-reduced products, in our vegan products, in our dairy-free products as well. And that's, of course, helping the overall mix management for us as well. Thank you.

I mean, again, I mean, I, you know, three hours in, um, I, you know, I can just say, I look at the, at the billboard up there creating chocolate happiness. I think we're in a high involvement category and that is, you know, obviously playing to the strengths of the company. And so I'm very positive looking forward. Um, obviously we need to think through what we have, what, you know, we can improve and that's exactly what we will do going forward.

Yep. Thanks, Jan from UBS. Three questions, please. The first one is, coming back on the product mix, you mentioned sugar-free, vegan, but these are still, in particular, vegan and dairy-free, maybe really lower volumes. What is really behind the product mix story? How much capacity you have left? Just if you can give us more details to understand the big move on the cross-profit. This may be the first question. I will do the others.

Yeah, and then you can continue. On product mix, very important. We have been very focused on it. And it's part of our strategy as well on how we deliver our new midterm guidance as well is focusing on specialty chocolates and cocoa products. You've seen us adding capacity into the market as well. We have added a factory specifically for dairy-free products in Noorderstedt. We are building at the moment in Ontario, Canada, a new factory focusing on better-for-you chocolates because we see the demand growing as well. So we are adding capacity there because we see a continuation of that momentum going forward as well. It is a key driver in our mix, but it's not the only part of it as well. Of course, you have a customer mix as well. uh remember also uh between the different customer categories in different countries as well the difference between private label uh branded business and so on as well i was asked a question before do you see that as a negative for for barry call about no we don't see that as a negative as well barry call about is growing is in every segment of the market whether it's private labor, whether it's branded, whether it's for the smallest user, the three-star Michelin restaurant, to the heart discounter, whether it's ice cream, whether it's bakery, everywhere where we can sell chocolate and cocoa products, we will continue to do so. And that's helping us overall in the mix as well. Even on the cocoa products as well, let's not forget about that. I talked about combined ratios as a key driver. At the same time, For years now, we have the focus on selling more value-added cocoa powders. Coming from our cocoa leadership project, we have been growing our premium cocoa powder brands on the Benzop. We have added more value-added alkalized powders, specific powders that are good for decorations. Actually, in Gourmet, we just recently launched a new range of cocoa powders for artisanal chefs as well. So there's a lot of excitement still to do with products together with our clients.

My second question, also to you, please, when the consumer price elasticity, when the bean price now is going up, will likely not disappear in 2024 when chocolate prices again go up. So, I mean, now you have an impact on your volumes, maybe 200, 300 basis points from price elasticity in the general chocolate market. A similar thing is likely happening in 2024. Do you plan for this? Do you have any answers on this, how you can tackle this?

It's fair to say that cocoa bean prices are on the rise. It's linked to supply after coming an expected second deficit. You've seen it already now pricing. On the other hand, on the world sugar prices, it is easier. Dairy prices are on the decline as well. This price elasticity was very specific to a couple of market high price sensitive markets and in our H1 it was a lot of what we call compound products. These are chocolate items that are made with cocoa powders and other fat structures and so on as well. Those prices actually went up tremendously because the palm oil as a key component went up tremendously and then came down rapidly as well. It is getting more affordable again in these markets. In the markets where we saw the biggest elasticity, issues actually we see we see more positive signs as well and in the markets more the established markets where we see more for the premium chocolate side it is actually quite good in terms of as elasticity as well we don't see the destruction in demand there. Thank you.

Maybe the last question, if I may ask, the new CEO, Peter, not anything about volumes, EBIT, et cetera, but about your leadership style, that we learn a bit more about you, your character, et cetera. Can you maybe give us a couple of points about your leadership style you have executed in the last 10, 20 years in your different positions?

I think there's probably two elements that matter, which is focus, that's the first one, and probably the other one is learning. I mean, that's an element that cascades through you know, from the time when I was running and building factories for Procter & Gamble, you know, then going into marketing and sales, later on working with FMCG companies, and then working with private equity-owned companies. So, you know, just at 8 o'clock this morning, we had the first round call with our APAC team, where we take questions, where obviously Ben has presented the results. Likewise, as you have seen them now, and we're obviously opening the floor for questions, and it will be an open style. Thank you.

I have a question on the U.S. consumer. How do you see it? Did you mention the stocking is over? Do you see down trading? Just give a picture. How do you see the U.S. consumer business also going forward?

Yeah, so when we report on America's numbers, that's of course the overall America's numbers, and there we were affected in a more price-sensitive market like Mexico, where it's much more these compound products, these bakery items as well. But overall, in the US itself, you've heard it from so many other companies as well. We saw, first of all, stock being built up during COVID, supply chain disruptions. Then you saw a destocking effect as well, which led then actually to delayed ordering in that market as well. Overall, the sentiment, it's a mature market. When you look at overall chocolate confection market in the US, There are some moments of decreases, and we have seen now a decrease in the first half of the year in the overall market in North America, which is actually the majority is in the US, went down with more than 2% in that market, even though the whole America's market was only 0.5% down. So it was quite sensitive for a while because there was a lot of uncertainty. But at this moment, I must say that more positive sentiment is returning to that market as well. We see that especially people are going out. They're still traveling. They're going out, having desserts, buying pastry and bakery items as well. So overall, it's quite resilient over the longer term. But quarter to quarter, there is always going to be differences as well. By the way, that's why we always look at our business a little bit longer term than just a quarter to quarter basis as well. But overall, the sentiment is turning more positive in that market as well. But the destocking was, and the effect of that, the recovery of orders was slower than what we expected, was weaker than we expected in the last quarter.

Jean-Philippe Berchi, Fontoval. I come back to management changes. I think you had several changes in the past months. And if not mistaken, I think Peter was as well in charge of Gourmet at Interim. So are you taking that over as well, Peter? Or what is the situation at Gourmet, which is crucial for you and has been as well not really performing in the past months?

Yeah, absolutely. Gourmet is for us a key growth driver and will continue to be a key growth driver in the future as well. There is still a lot of excitement going on. We have not discussed it further and I will not comment on it at the moment as well. But rest assured, within the team, so yes, Peter was leading it, but we have a strong performing team that is going after gourmet in each market because you have the global part of it with our global brands, but there is also a very vibrant local gourmet scene as well. And we try to cater every aspect of the gourmet market as well. And so the teams know what they have to do. They know what they have to deliver. So I'm very confident that we will continue to deliver. While we're, of course, now looking... Allow me also some time to get to know Peter a little bit better as well and allow him to... We're not dropping balls.

We're not dropping balls. It's not going to be... you know, without leadership. Yeah.

But very good. Good points.

Yeah. We take the next question from the line.

The first question comes from the line of Laura Molina with Citi. Please go ahead.

Hi. Good morning, everyone. Thanks for taking my question. I had a couple. Firstly, just to follow up on a recent question around kind of destocking in the Americas. Just wondering how confident are you that destocking is now behind you? It's all captured in Q2. And I guess on that, what visibility do you have into retailer inventory levels that might give you confidence there? And then are you seeing, as we're exiting Q2, are you seeing any evidence of restocking or customers wanting to refill some inventories that maybe they've excessively destocked? So that's my first question. The second one would be around the outlook specifically for the full year on volume growth. So what are you assuming happens to the underlying market in chocolate for the volume growth in order to get to your targets? And also whether you can comment on the key drivers in relation to your volume growth, so emerging markets, outsourcing, and the Gourmet specialties. Thank you.

Thank you, Lauren. So first of all, on the destocking, now looking backwards again, hey, we thought that the cycle itself would have been shorter. We have not seen in the first half, in the second quarter, the recovery yet. So... In our business, of course, we're working with perishable products and compared to other flavor companies and so on. We're not talking here about more than a year cycle, but it's very difficult to predict the exact months and so on as well. What I can say is that for the second half of the year, we see gradual improvements for our US business as well, linked to the recovery of the destocking and the delayed orders linked to that from our clients. And also, secondly, what I said about the Mexican markets, that is also part of the Americas region, where we saw shrink inflation, we saw demand of one of our key customers or partners there in that market being very weak. We do see positive signs there coming back as well. As the price of the products have now been reduced, the input cost has been reduced. Think about what happened on the world sugar market and the fats market. So we think that that's now in the second half to be positive. So overall, our full year, as I mentioned earlier, we expect it to be flat to modest growth. What needs to happen is, first of all, I will go a little bit market to market. We see a normalization after the shrink inflation, after the inflation impacts in Japan, Indonesia, and Mexico. That is going to normalize. It's going to gradually improve. We also, of course, are hunting for new customers as well. And I must say that also the opening of the market, more specifically in Asia Pacific, where I mentioned that China is now opening up, and we see already there the double-digit growth in February. That is only going to continue. We work with our teams in Asia, and we see positive momentum there building up. Important, something that I did not mention earlier on the America's market, you see the difference between North America and South America, where the North America overall confectionery market was quite weak, with a decline of more than 2%. At the same time also, and that's not in the confectionery numbers, also ice cream market itself in the US was quite weak as well. But that's something we see now, positive signs coming back. Overall, it's a combination of a lot of things, but that's why we are confident to deliver flat to modest growth for the full year, which means growth in the second half of the year to offset our decline in the first half.

Next question from the lines.

The next question comes from the line of Anthony Myers with Confectionary News. Please go ahead.

Oh, hi. A message for Peter. I've just wondered how the new change at the top affects Bari Calibre's sustainability strategy moving forward. I mean, Peter was very active in that area, very supportive. So what can we expect now moving forward? Thank you.

Yeah, I think that's fundamentally important for us as a company and for me as a person, I should say. You may have seen an announcement. I've been a vice president to the German Brand Association for about 10 years and actually had the helm to take forward the sustainability program for the industry at that point in time across different businesses. So it's something that is very close to my heart and we will absolutely carry that forward going in the future.

Yeah, and we will have our Forever Chocolates day on May 10th, so more exciting news coming your way as well.

Thank you.

We have one more question from the lines. The last question from the telephone comes from the line of Andreas von Arx with Barahelvia. Please go ahead.

Yeah, good morning. I'm afraid I missed the start of the call, so apologies if you already covered that topic. But with regards to the CEO change, has there been an extended external search process with internal and external candidates? First question. And second question for Peter Feld. I mean, isn't it a bit odd that you join as CEO of Barry Callebaut from a company that previously has reduced position in the very same company, which is not really speaking of confidence in the business model. Thank you very much.

Okay, so that's two good ones. So let me take the first one. I think, you know, as I mentioned before, I've been asked by the board of directors of Barik Kalibao to consider this role, which I did, and you can rest assured that they're following the compliance and everything that needs to happen, you know, in a public company. And I'm very happy to, you know, to be in a position to take that on. I think, you know, also for whatever happened in the history, I can't comment on that because I wasn't there. And so I think, you know, obviously for me leaving Jacobs Holding, that creates a void in Jacobs Holding. So, you know, it's not easy for Jacobs Holding at this point in time. The employees on that side have been informed in parallel to the information that you saw this morning at 7 o'clock or shortly after 7. Yeah. And I will actually be with them later to have a communication with that team. But I don't want to comment further on that because I haven't been before there. And as I mentioned on my initial statement this morning, there's just a few matches that made a lot of sense for both sides. And also my passion for the business is very obvious, as I explained.

There is one more question on the phone.

Thank you for taking my question.

My first one would be on the banking crisis that we've seen. Now that Credit Suisse has been taken over by UBS, which I assume you are banking with, Does that change your business? Does that impact your business in any way? And does that also mean you might look for other larger foreign banks to do business with? My second question is on the news. We've been reporting on bin shortages in Ivory Coast. Has that impacted your exports or your access to bins in that region? And if so, what are you doing to mitigate the challenge that comes from that region? And would you say something on where you're seeing direction of demand going, especially in Europe and the Americas, as customers deal with the cost of living crisis? Thank you.

Thank you. So on the banking crisis, I will be very, very short. I can only comment on our own company. We have a solid cash management. As you know, we are sitting on a good cash balance as well. So in that sense, it does not affect any of the crisis out there, our company. Now on the bean shortages, you saw the news in Ivory Coast towards the end of the main harvest season that there were shortages and yes, it did affect quite a bit of companies. We were in the news about it as well. We were at the tail end. We had already completed our seasonal buy of beans, so it did not affect any of our factories or shortages. I'm very pleased to announce that shipments have resumed again. So this is now totally behind us as well. But it's fair to say that when there is a more balanced cocoa crop and when we're going into the second year of a deficit, coming from a huge surplus before, that you will have situations like this on and off as well. because it is more tighter on the supply side. But having said this, there's plenty of cocoa beans around. There are plenty of warehouses with cocoa beans. There is no shortages. You should not be worried about not having chocolate products around. There's plenty of chocolate, especially for Easter coming up as well. There are actually demands growing. It's more what I said earlier on. We see demands growing for better-for-you items, sugar-reduced items, but also lifestyle chocolates like vegan, dairy-free products as well. So overall, we see demand per capita still growing in emerging markets coming from a lower base. So that's where the overall consumption of chocolate in terms of volume per capita is still going to grow more stable in mature markets. But it's a different type of products, of course, that consumers are demanding. And we do see some shifts between the locations on where consumers are buying their chocolates as well. You see them more going in markets where it's a tougher economic environment, going to hard discounters as well. But of course, as I mentioned earlier, that does not affect us. Overall, we are supplying the whole industry and every segment of the industry.

Are there more questions in the room?

Hi, James Amoroso. I do have a question for Peter. You've got obviously a fantastic CV and you've achieved an awful lot during that time. Is there one thing that you can point to that you think, yeah, I'm really proud of that, your biggest achievement and how you went about achieving it?

So when you think on the last role, right, in GFK, obviously we've lost track in being relevant to the customers, and that should never happen. And so we had a lot of discussion in the company early on with employees and as well with your colleagues when the company was still public early on. where we had discussions about what do you do, how do you connect to growth, how do you even do that? And so digitization was a key way out. And for me, I'm a mechanical engineer from training. It was a fantastic journey to learn about how to build a platform that creates data democratization throughout the organizations of our customers where customers are willing to pay up. And so I think that was a fundamental continuation on a very strong foundation that we had getting data from 125,000 retailers globally on and offline. but then actually just make more sense for our customers out of it. And so that's probably one of the examples, you know, that cascades through my whole career, right? I mean, how do we create relevance for our customers? And likewise, that's probably what will drive me in this journey. Your colleague asked me about sustainability. I mean, we have a fantastic backbone on sustainability, so I'm really looking forward to learn more about that. I think that is an anchor stone of the company to take forward. It's relevant to any consumer in the world, let alone all our customers. And so there's great opportunities for us to continue that journey, driving more relevance, driving more price, obviously, on the back of it, and creating value for our customers and their end consumers. Thank you very much.

Thanks, Jean-Philippe. Back again. A question on M&A. Of course, it's very difficult to comment, but I'm back to Gourmet, probably with one of your competitors, making some acquisitions, strengthening its position with a former Bari manager. What is the view here, and maybe to Peter as well, if you have some experience with regard to M&A?

So let me start on M&A. We always carefully look at M&A opportunities, inorganic opportunities as well, whatever comes to the market as well. And then we have key drivers internally that we check very carefully. It's of course the price to be paid. And the second part of it is, hey, can we grow organically better, faster ourselves as well? And then you come to quick conclusions that not everything that's available on the market is at the right price. But it comes with a conviction as well internally. It's like, hey, we can do this. We have a proven track record as well. We can grow our markets organically as well. think about what we have done during covet's time uh as well but hey a lot of the gourmet markets was done we we have proven that with our own teams we did not uh restructure our teams we can grow market share we can grow in a lot of markets as well and that's a little bit it's a show of confidence uh in our own ability to uh to to grow as well at an affordable level I don't know whether you want to.

I can just say that for me, it's always important to start with our purpose statements for who are we, but then where do you want to play? That should determine what we're actually looking at. I think in my mind, in my past career, I had opportunities to create joint ventures, to invest certain businesses where we probably couldn't create value for our customers. But then also, you know, just create and unlock significant opportunities through cooperation with others and joint ventures. For example, the Symphony Technology Group, where GFK actually created a joint venture for the U.S. market, which was a very distinct business, or Coffee Day Cafes with WMF coffee machines. So we will look at things as we have to, but it needs to make sure that they, you know, are in the corridor, that we think we can truly create value.

Yeah.

Thanks, Jan from UBS again. Two follow-up questions, please. The first one is on outsourcing. How do you assess the current pipeline, and isn't it the case that your key customers guiding for negative volume growth maybe say, okay, look, we insource here and there to fill up our own capacity? Is this something you observe right now? Or are there other special reasons why outsourcing maybe is not as strong as maybe thought or hoped one or two years ago currently? So that would be the first question, then I would have a quick follow-up.

Yes, on the outsourcing, first of all, it turned positive in the second quarter. You saw that we grew 3% there while the overall volume was down. So that's already a positive sign as well. And outsourcing, for me, it's important that we come to a win-win. We have been more selective compared to the early days of Barry Calabat, which was about building a footprint, building a global presence. But for us, it's very important that we create a win-win that is also creating benefits to our bottom line as well. So it's a careful balance. It's never a no discussion. It's always a not yet discussion with a lot of our potential outsourcing clients as well. As you know, more than 50% of the market is still in-source. There's huge potential there, but everything needs to be checked as well and needs to be seen. At what point can we create value for the customer and at the same time create value for Barry Callebaut as well by combining sometimes smaller outsourcing deals, but also looking at certain geographies and so on as well where we're already present that we can put it into our existing facilities, but also we're still not afraid to invest together with our clients in new markets as well. But for us, very important is to come to critical mass, to come to win, is that it's not just about volume in our books without adding value as well. A follow-up on that part on outsourcing as well. We don't necessarily count it as outsourcing, but actually what's happening in the market now with new items like organic dairy-free and so on, We are selling these to large corporations as well. It's not really an outsourcing because it was never insourced in the first place. But over time, you have to think about it as well. Hey, this is actually a new outsourcing. When products are shifting to a different category as well, where we are at the forefront, that's something that is adding to our growth as well.

Thank you. And then the last question, please, on your capex details. For the next two to three years, how much of the growth capex is actually going into this value-add product? Is it 70-30 versus previously 50-50? Just that we have a little more clarity and understanding. And also the total capex run rate. Are you adjusting a little bit after the weaker fiscal year 23 volumes?

It's all about phasing as well. You saw that we reduced a little bit compared to prior year. But overall, in the midterm, we are still around thinking about a number around 300 million, 310 million Swiss francs, which is based upon historical normal run rates as well. Of course, a lot of this investment, you saw our announcement of our new facility in Ontario, Canada. It was publicly announced that it's a $100 million investment in that facility, which is catered towards the better for you. And that's beautiful in the model now that we are building. We can do it at scale because we can combine a lot of clients into one facility. If you are an insourced player and you have to change over between regular chocolates to white chocolates, then to colored chocolates, then to dairy-free or vegan products or sugar, you lose a lot of efficiency. With us, we can put a lot of customers together into a facility and can do it at scale as well. That leads towards our cost leadership as well in that area. That's why we continue to invest. The overall amount still around the same level. We will always carefully plan that out on when we add capacity into the market as well. When we build new facilities, we don't build all the lines all at once. We gradually, systematically add lines in our facilities as well. Because for us, very important is to run at our capacity utilization at a high rate. Thank you. Thanks, Joon. Okay, Claudia.

Yes, I think with that we close the conference for today. Thank you very much and of course we are welcoming you people in the room to a slight coffee or to some chocolate of course.