Slow Start to Year for Barry Callebaut, but Guidance Implies Strong Growth Ahead; Shares Cheap

Barry Callebaut released its first-quarter 2023 trading update. Volume was down 5.1%, lower than company-compiled consensus (down 3.3%), due to the impact from the Wieze ramp-up and tough comparables. Within this, the key drivers were the gourmet and EMEA segments, both affected by the temporary closing of the Wieze factory, which has been fully operational since the end of October. Despite the slow start to the year, the company is committed to achieving its midterm guidance (5%-7% volume growth and EBIT above volume growth by fiscal 2023 versus 6.1% in our model), pointing to over 8% volume growth in the next three quarters of fiscal 2023. Management also introduced new midterm guidance for the three-year period to fiscal 2026 for an average 4%-6% in volume growth and 8%-10% EBIT growth in local currencies with further improvement in return on invested capital, all broadly in line with our estimates (5% average volume growth and 7% EBIT growth, improving ROIC). We maintain our CHF 2,400 fair value estimate. With the shares trading in 5-star territory, we think Barry Callebaut makes a compelling investment case for defensive long-term-oriented investors.