Posted on 16 March 2011.
Benefiting from improving consumer sentiment across its domestic and international markets, Swiss premium chocolate manufacturer Lindt & Sprungli has reported a 25.3% jump in net profit to SFr241.9m (Eur189m) for 2010. Group sales were SFr2.58b, showing strong organic growth of 7.3% during 2010 but growth in Swiss francs was 2.2%. Despite the negative currency factors, EBIT was 22.8% higher at SFr325.3m, while the EBIT margin improved from 10.5% to 12.6% during the year.
During the period of global recession, consumers had tended to shift to lower priced private label products; however, as the upturn set in the demand for high quality chocolates returned. All the subsidiary companies, except for Australia, achieved faster growth than the market average and so contributed to the strong group financial performance. The leaders were the two important North American markets (USA and Canada with the Lindt and Ghirardelli brands), together with Great Britain, Europe’s biggest chocolate market, where double-digit growth was achieved.
In countries like Italy, Spain, France and Germany, which had been hit by the economic crisis and the accompanying weaker consumer sentiment in 2009, Lindt & Sprüngli achieved substantial growth rates. Even in the highly competitive Swiss domestic market, Lindt & Sprungli managed to consolidate its leading position and further increase its market shares. Although sales in Australia fell short of expectations overall, the concept of the ‘Lindt Chocolat Cafes’ continued its highly satisfactory development, and the opening of further cafes is planned.
The strong results are in line with the forecasts already announced by Lindt & Sprungli in the spring of 2010, and show that the structural measures and adjustments made in the last two years have created a new dynamic so as to benefit from an upturn in market conditions. The balance sheet remains healthy. At the end of 2010, the equity ratio and net cash flow of the business stood at 66.2% and SFr540m respectively.
During the 2010 financial year, the major investment project to expand the US production site was successfully completed after four years of work. The plant now has all the facilities needed to handle every single production step from cocoa bean processing to the finished and packed product on site, and is no longer dependent on cocoa mass imports. This also optimises currency risks and transport costs. In addition, substantial investments were made to enter new markets, including the incorporation of a subsidiary company in Japan, as well as further expansion of the global network of own boutiques and ‘Lindt Chocolat Cafes’.
Outlook For 2011
Lindt & Sprungli expects the recovery of the world economy and the improvement in consumer sentiment to continue in the 2011 financial year. However, the unstable commodity market situation, especially for cocoa, is likely to persist because of political unrest in the Ivory Coast, the biggest cocoa producer. The trend of prices for other raw materials, such as milk, sugar and nuts, also remains uncertain.
With a full pipeline of new ideas and innovative products, Lindt & Sprungli is well placed to achieve further growth and strengthen its position as world leader in the premium chocolate segment. In 2011, the focus will once again be placed on market share gains in key markets. In addition, geographical expansion into the new growth markets will continue.
For the financial year 2011, the Lindt & Sprungli expects organic growth of 6-8% and an improvement in its operating results (EBIT) of 8-10%, in line with the group’s long-term strategic objectives.