UL Unilever PLC

By John Revill 

ZURICH--Barry Callebaut AG is confident of taking a bigger chunk of the chocolate market, strengthening its position as the world's largest supplier now that global demand is showing signs of recovery.

The Zurich-based company, the maker of the chocolate that goes into Oreo cookies, is seeing demand stabilize in many markets, said Chief Executive Antoine de Saint-Affrique.

"The long term forecast for the confectionary market is 1.8% growth, and we see a stabilization of markets altogether," Mr. de Saint-Affrique said.

Growth in Barry Callebaut's sales volumes to restaurants as well as to food, ice-cream and drinks manufacturers like Mondelez International Inc. and Unilever NV contrast with shrinking global demand for confectionary, particularly in some emerging markets.

"The interesting thing is the decline in some ways is slowing down, or getting better," said Mr. de Saint-Affrique.

The comments followed Barry Callebaut's announcement of a 19% drop in net profit for the six months to Feb. 29 to 107.9 million francs ($112.7 million) from a year earlier on a 5.6% fall in revenue to 3.42 billion francs.

Fiscal first-half sales volumes rose by 4.5%, a contrast with the 2.6% decline in the global confectionary market measured by market research company Nielsen.

"In the global confectionary market, volumes are still negative, but the value is going up," said Mr. de Saint-Affrique. "Six months ago we were at -5%, so the trend is improving bit by bit."

Mr. Saint-Affrique's bullish outlook cheered up investors, with Barry Callebaut stock rising more than 6% in early trading in Zurich.

Barry Callebaut's first-half results would have been better had it not been for the strong Swiss franc. Revenue rose 12% in local currencies.

The franc has soared in value over the past year against the euro since the Swiss central bank scrapped a long-standing limit on the currency's value early last year. Barry Callebaut said it suffered a "severe" impact in converting its foreign profit back into Swiss francs.

Sales growth was also tempered by the company reducing some sales in the cocoa business, with less profitable contracts phased out. Mr. de Saint-Affrique said Barry Callebaut would be more "picky" in future.

Management would also continue to look at bolt-on acquisitions, particularly of companies that make high-end chocolate used by chefs for desserts, he said.

Mr. de Saint-Affrique said he expected a "small deficit" in the cocoa market this season, with demand outstripping supply, but that it wouldn't threaten the overall supply-demand picture for the bean, which is largely produced in West Africa.

Dry weather and a strong seasonal harmattan wind, which dries out cocoa pods, have stoked fears of a shortage in the mid-crop, the second and smaller of the region's two annual harvests.

"We don't foresee a major structural tension when it comes to supply," he said.

In February, the International Cocoa Organization also forecast a cocoa deficit for the 2015-16 season of 113,00 metric tons, attributing the drop to dry weather in West Africa.

Katherine Dunn contributed to this article.

Write to John Revill at john.revill@wsj.com

(END) Dow Jones Newswires

April 06, 2016 06:47 ET (10:47 GMT)

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