ZURICH — Sales increased 11% at Barry Callebaut in the first half of the fiscal year, but cocoa bean prices jumped 75% over the same time, forcing the Zurich-based company to seek additional financing to help mitigate higher cash requirements in bean sourcing. The financing included a bond of 600 million Swiss francs ($659 million).

“We are well covered with beans,” said Peter Feld, chief executive officer, in an April 10 earnings call. “That is probably the biggest message that I gave to the global CEOs that I'm seeing frequently. That's the most important message. We have a clear competitive action in sourcing, but importantly, on having thousands of employees in the sourcing countries on the ground.”

Barry Callebaut’s free cash flow was down 1.12 billion Swiss francs ($1.23 billion) in the first half of the fiscal year due to the bean price impact on working capital, given the long cycle between bean contracting and customer sales. Barry Callebaut’s net debt in February was 2.64 billion Swiss francs, which compared to 1.31 billion Swiss francs in August of 2023. The 600 million Swiss francs bond will refinance an existing €450 million ($482 million) senior bond due in May.

Cocoa bean prices increased to 5,200 Swiss francs per tonne from 2,900 Swiss francs over the fiscal year’s first half, said Peter Vanneste, chief financial officer. London cocoa futures stood at ₤7,852 (7,661 Swiss francs, $8,411) per lb on April 9, which compared to over ₤3,000 per lb in January and about ₤2,000 per lb in January of 2023.

While poor weather negatively impacted cocoa volume in the Ivory Coast and Ghana, large industrial players ordering late drove price spikes as well, Feld said.

“So, the thing went vertical,” he said. “We're now in a period of probably eight days where it's pretty flat. So, we'll see where it goes. We believe that what goes up fast, comes down fast at one point in time, and we're preparing for that.”

Vanneste added, “Looking a bit further out, we do believe that these supply pressures will ease in West Africa, these high prices that will get through to farmers. We'll encourage farmers to invest more in fertilizers. We'll invest more in replacement of agent fees in productivity and so on.”

Cocoa bean supply may also increase in other markets, like Ecuador.

“It's obvious that the appeal of a higher bean price makes their cases different,” Vanneste said. “There's more available land. Sometimes the diseases that you've seen in West Africa are not being present there.”

Barry Callebaut’s sales revenue of 4.64 billion Swiss francs compared to 4.18 billion Swiss francs in the first half of the previous fiscal year. Higher cocoa prices and an inflationary environment drove the increase.

Sales volume of 1,139 tonnes in the first half of the year was up 0.7% from 1,131 tonnes durng the same time of the previous year. A net profit of 77 million Swiss francs was down from 234 million Swiss francs due to one-off operating expenses, of which the majority were non-cash impairments and write-downs, in the BC Next Level program. As part of the program, Barry Callebaut plans to move closer to customers and markets and simplify and digitalize the front and back ends of its business. Over 25 country clusters have been established with regional presidents and country general managers appointed.

“While we are progressing well with our plans, you know that the world has changed since the first of November radically, literally cocoa prices have increased to record levels, and supply has become a problem for several players in the market,” Feld said.