Chocolate maker Barry Callebaut tapped a €1 billion ($1.09 billion) revolving credit facility to shore up liquidity after the coronavirus epidemic hit sales in early 2020, the Swiss company said, signaling the worst impact may yet come.
Barry Callebaut supplies chocolate and cocoa products to companies like Nestlé and Hershey as well as restaurants and pastry shops under its gourmet business, which has been severely hit by lockdown measures to stop the coronavirus pandemic.
"We drew on the credit facility just as a precautionary measure to ensure the liquidity of the company moving forward," chief executive Antoine de Saint-Affrique told reporters on a call, adding the facility had been in place for years for precisely such a situation.
"There was indeed significantly less activity on the commercial paper market," he said.
Shares in the company, which have fallen almost 12% so far this year, declined 1.8% in early trading.
A Sharp Slowdown
Sales volumes at the world's biggest chocolate and cocoa product maker rose 5.4% in the six months to 29 Feb, implying a sharp slowdown in the second quarter, from 8.2% in the first three months.
Asked about Easter sales, not yet contained in the numbers, De Saint-Affrique said with many chocolate and pastry shops closed, there obviously had been an impact, but the company had tried to encourage its small customers to sell more online.
Vontobel analyst Jean-Philippe Bertschy said organic volume growth was negative in the second quarter and predicted another weak quarter ahead, recommending a "hold" on the shares.
De Saint-Affrique said with the exception of China in February the half-year results had not yet been materially impacted by the COVID-19 pandemic.
'Full Demand Recovery In China'
"While COVID-19 keeps progressing in many countries, we are seeing a full demand recovery in China. Obviously this is a major and unforeseen event, the impact of which we cannot yet quantify as it depends on the duration and severity," he said.
The group did not give an outlook for the current fiscal year - which Baader Helvea analysts called "an uneasy signal" - but confirmed its mid-term guidance for 4-6% average sales volume growth to 2021/22.
De Saint-Affrique declined to comment on the likely margin impact. Asked about possible price cuts to stimulate sales, he said: "The key challenge is not a matter of price, but of stores being open or not."
Net profit rose 7.1% to CHF211.7 million (€201.22 million) in the first half.