Barry Callebaut AG ruby natural chocolate discs are displayed at the Sweets & Snacks Expo in Chicago, Illinois, U.S., on Tuesday, May 21, 2019.
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Swiss chocolate maker Barry Callebaut on Thursday slashed its operating profit forecast, citing falling cocoa prices, industry overcapacity and potential supply disruption linked to the Iran war.
The company, which is the world’s largest chocolate maker, said it now expected earnings before interest and tax (EBIT) to decrease by “mid-teens” percentage in its 2025 to 2026 fiscal year.
The outlook reflects a significant downgrade from just three months earlier, when the Zurich-headquartered company said it was preparing for a return to growth.
Hein Schumacher, who was appointed Barry Callebaut CEO in late January, said Thursday that the firm has an “unparalleled market position” and fundamental growth opportunities, while warning of a “turbulent period” of industry disruption.
“In the first half of our fiscal year, cocoa bean prices decreased, which is encouraging for future chocolate market momentum and supported strong free cash flow generation,” Schumacher said in a statement.
“Yet the unique speed of the market decrease combined with a competitive overcapacity market, volume declines and supply disruption impacted EBIT performance and adjusted our profitability outlook for the year as we prioritize restoring volume and leading the market back to growth,” he added.
Shares of Barry Callebaut fell as much as 17% on Thursday. The stock was last seen trading off by around 15.8% shortly after 2:30 p.m. London time (9:30 a.m. ET).
Cocoa prices fell 0.72% on Wednesday, reaching $3,537.28 per tonne. Despite rallying over the past week, cocoa prices have slumped 41.6% since the start of the year, and are down 57.6% over the past 12 months, according to Trading Economics data.
Like most commodities, the closure of the Strait of Hormuz has impacted cocoa prices with restricted supply and higher costs. However, much stronger harvests compared to recent years, when prices have soared, have kept a lid on cocoa costs.