Barry Callebaut AG (OTCPK:BYCBF) Fourth Quarter 2022 Results Conference Call November 2, 2022 5:00 AMm. ET
Participating companies
Claudia Pedretti – Manager, Investor Relations
Peter Boone – President and Chief Executive Officer
Ben De Schryver – Chief Financial Officer
Conference Call Participants
John Ennis-Goldman Sachs
Jörn Iffert-UBS
Jon Cox – Kepler Cheuvreux
Lauren Molyneux – Citi
John Revill – Reuters
Andreas von Arx – Baader-Helvea
Nathalie Olof-Ors – Agence France Presse
Pascal Boll – Stifel
Alex Sloane – Barclays
Claudia Pedretti
Good morning, girls and gentlemen. Due to an unforeseen event, our full annual effects for fiscal year 2021, 2022 are published as of today, which is why we have postponed this convention – analyst and media convention in the near term. Thank you for your understanding. And also for those who couldn’t attend today, we’ll make sure they don’t run out of chocolate after the event. As usual, our CEO, Peter Boone, speaks to you today; and our Chief Financial Officer, Ben De Schryver.
Please note that the data provided at this convention are forward-looking statements that reflect the most productive of our existing knowledge. While the actual effects would possibly be different. In addition, we would like to inform you that the Internet broadcast is being recorded.
That is today’s agfinisha. As usual, Peter will start with the highlights of the year, followed by detailed monetary effects presented by Ben. And Peter will finish, with the strategy and perspectives, before we open the channels for your questions. Once you return, you will get commands from the operator at the end of the call.
And with that, I pass it on to Peter.
Pierre Boone
Thank you Claudie. Ladies and gentlemen, welcome to our year 2021, 2022. We look forward to an exciting and eventful year. Overall, we are pleased with the percentage of a wide diversity of iconic cocoa and chocolate products. For those in the room, here are some of the highlights you can enjoy after the conference.
Let’s see how we act. I am proud to report a solid set of full-year effects, with strong expansion in sales volume, i. e. increased recurring profitability and money generation. Sales volume increased by 5. 3%, driven by the chocolate business, namely
Current operating profitability increased significantly to 13. 5% in local currencies, as well as net profit from recurring activities for the year at 14. 1% in local currencies. We continued our smart money generation with adjusted loose money of CHF 358. 5 million. Ben will distribute the monetary effects with you in more detail. But before that, let me continue with some highlights of the year.
Now let’s start with the highlights of this familiar chart showing volume expansion throughout the quarter for cocoa and chocolate. We were on a very, very strong expansion trajectory in the first nine months, impacted by the Wieze incident in the fourth quarter. Despite this, we still achieved a strong volume expansion of 5. 3%, basically driven through strong chocolate functionality of 5. 9%. According to Nielsen, that’s the way forward in the flat and underlying chocolate confectionery market.
Global Cocoa’s volume expansion returned to normalized levels of 2. 5%. And let’s take a closer look at our main expansion drivers. All the major expansion drivers have contributed to this, at Gourmet
Emerging markets also posted forged single-digit growth, driven by key markets such as China and India. In subcontracting and long-term partnerships, we added more than 36,000 additional tons, one of 4. 8%.
Active, we had an eventful year. And this slide gives you a review of some of our ultimate life steps. To name a few, we celebrate the grand opening of a new plant in Ontario, Canada, which will produce sugar-free, protein-rich chocolate products for North America. We extended strategic sourcing agreements with Hershey and Bimbo, and signed a long-term distribution agreement with Levapan, to drive expansion in Latin America.
The opening of Chocolate Box, our global distribution center in Lokeren, was a significant investment for our global distribution and leveraging the benefits of our size. We have signed a partnership with distributor and manufacturer Attelli, which has established our first chocolate production footprint. in Morocco, and consequently on the African continent.
We have also opened a CHOCOLATE ACADEMY Center in Morocco and Shanghai. Therefore, we are now expanding the network to 26 CHOCOLATE ACADEMIES worldwide. In general, many occasions that we can be very, very proud of. I am also very pleased that we announced two weeks ago that the world’s largest chocolate factory is back at full capacity.
I would like to express my deepest thanks to all our colleagues, who have worked tirelessly for weeks to get the Wieze plant back up and running. In addition, I would like to thank our consumers for their understanding and cooperation at this difficult time. The speed with which we learned the root cause of the contamination and obviously started the clean-up procedure showed that our concentrated and uninterrupted investment in food protection and quality is paying off.
And speaking of pride, just take a look at those amazing and tasty answers we all offer our customers. We drive fashion innovation. Therefore, it is a conscious intelligence thanks to our experience in dairy-free chocolate, chocolate and whole foods. And we continue to set the benchmark for chocolate innovation.
Just last week, we introduced the chocolate moment generation, which consists of just two ingredients for dark chocolate or 3 ingredients for milk chocolate, placing cocoa first and sugar at the end on the label. The distinctive flavor characteristics of the cocoa bean crop awakened the fermentation and roasting procedure are basic for this new chocolate.
And with that, I’ll pass on to Ben the percentage with you of our monetary effects in more detail. Ben, the level is yours.
Ben of Schryver
Thank you, Pierre. Ladies and gentlemen, I am pleased to give you our monetary effects. First, allow me the informed part of our annual effects, because on the slides, from then on, I will concentrate basically on the recurring effects. The reconciliation of the recurrent effects for reported purposes consists of 3 blocks.
As already announced in the half-year results, we had a positive effect of CHF 13. 5 million due to the recovery of oblique tax credits in Brazil. As reported in the nine-month sales update in July, the salmonella incident at the Wieze plant had a significant monetary impact of minus CHF 76. 9 million. This net one-time impact includes the estimated burden of fulfilling contractual obligations, the cleanup, destruction and net shipment burden of insurance. The volume of direct losses and related gains are included in the reported results. And finally, the closure of our chocolate factory in Moreton, UK, resulted in a charge of CHF 7. 8 million.
In summary, the 3 non-recurring pieces amounted to less CHF 71. 2 million in operating results, which led to a reported EBIT of CHF 553. 5 million compared to a recurring item of CHF 624. 7 million, basically having an effect on the EMEA region and due to the recovery of taxes in Brazil America and Cocoa Global. In net income, the non-recurring effect was slightly lower, due to an additional positive monetary result in the Brazilian tax recovery amounts. In the next few slides, I’ll focus on recurring numbers.
Let me now return to the key figures on slide 14. As Peter pointed out, we achieved a strong volume expansion of 5. 3%. This expansion has been broad-based, across all regions and product groups. This is a wise expansion that has boosted profits. through an even greater combination. Recurring EBIT increased through 13. 5% in local currencies or 10. 2% in Swiss francs, more than doubling the volume expansion. The net recurring revenue source for the year amounted to CHF 428. 5 million, up 14. 1% in Swiss francs. Last but not least, we saw a continuous generation of fake money of CHF 266. 2 million and adjusted for trouble-free tradable inventories, even at CHF 358. 5 million.
We’ll go into more detail in the next few slides. But first, let’s take a look at functionality across the region. All regions contributed to the strong volume increase, outpacing in particular the underlying regional confectionery markets. EMEA was on its way to achieving very clever effects until the Wieze incident. Despite the notable impact in the fourth quarter, healthy volume growth of 4. 3%. it was on track to catch long before the crash in the underlying markets according to Nielsen. And raising overall volumes for the first time, above one million tons.
After a slow start, the Wieze plant has been returning to capacity since late October. In particular, the incident has affected the volume expansion of food brands in Western Europe, affecting their healthy expansion so far. The Gourmet activity
Reported EBIT operating profit decreased to -15. 6% in local currencies. Excluding the non-recurring effect of Wieze and the charge of the final Moreton chocolate factory, the expansion of the recurring EBIT volume more than 2x to 10. 5% in local currencies, reflecting a positive combination and effective load control.
The example of the Americas region showed strong and smart expansion, resulting in double-digit EBIT expansion. Sales volume reached a record of almost 650,000 tonnes, an increase of 6. 4%, particularly outpacing the underlying regional chocolate confectionery market. Food brand volume expansion that has been widespread and supported through current trends of better products for you.
Gourmet
Food brands continue to show strong expansion in key markets such as India and China, while some markets such as Australia lag behind. Recurring or consistent sales profit increases up to 2. 9% in local currencies. EBIT expansion in volume, basically due to initial investments for expansion. However, the region’s profitability consistent per tonne remains well above the organisation’s average.
Our Global Cocoa business showed an uptick in profitability as expected. This is reflected in the 7. 5% accumulation in recurring EBIT in local currencies. EBIT reported includes the positive effect of the recovery of oblique tax credits in Brazil.
Now let’s go back to the point of organization and take a look at the bridge of gross advantage. The strong advantages gained from volume expansion combined with a positive combined effect, reflecting Gourmet’s strong expansion
Overall, gross margin increased by 8. 4% in local currencies, driven by volume growth. Note that the coins had a strong negative effect of minus CHF 26 million. the underlying value of cocoa beans. This is a prospective curve. The results are noticeable over a period of six to nine months.
That said, the combined proportion of cocoa increased to 3. 6-fold from 3. 5-fold last year. This was the result of the steady increase in cocoa powder values, while cocoa butter values were still suffering from the domino effects of COVID-19. It was only towards the end of the year that the price of cocoa butter began to rise thanks to the higher intake of chocolate in Europe and the United States. The global source of beans and the demand for forecasts for the 2022 harvest year imply a shortfall. However, the gigantic stocks of last year’s surpluses allow a sufficient source, which deserves to lead to an overall balance.
Now let’s take a look at the operating source of the revenue bridge for this fiscal year on slide 18. Our recurring EBIT advanced significantly, up 13. 5% in local currencies. As we have just explained, gross profit contributed an additional CHF 96 million. Sg
Our next slide shows the evolution of EBITDA to net profit for the full year. Financial pieces increased to CHF 122 million due to the strong accumulation in benchmark interest rates. Schulscheindarlehen’s partial prepayment on February 22 mitigated this effect somewhat.
Income taxes: Tax expenditures decreased to CHF 70. 8 million from CHF 80. 5 million in the last year, due to the decrease in profit before the source of income tax and also to a more favourable mix of countries. This corresponds to an effective tax rate of 16. 4%. Source of recurring net income higher by 14. 1% in local currency.
On slide 20, we show the long-term progression of primary products. Thanks to our increased cost style that is used in the main basis of our business, volatility in raw curtain costs and other production costs generally does not affect our profitability. However, this has an effect on our current capital.
The price of cocoa beans closed at £1,878 per tonne on 31 August 2022, an average increase of 4. 2% on last year, less than any other soft commodity based on basic principles.
The world sugar market grew by an average of 18. 7%. This is due to an especially low Brazilian harvest and a market environment marked by high energy costs and geopolitical uncertainties.
Sugar prices in Europe rose by an average of 56. 4% per year. It has faced high demand with a low source due to reduced surface dominance and dry climate. of dairy products accumulating UPD through an average of 51. 5% per year.
Rising demand coupled with a very extensive drop in milk supply, driven by drought in the northern hemisphere and input inflation due to the war in Ukraine, has pushed dairy costs to all-time highs. I am very satisfied with the generation of fake money, which resulted in a counterfeit adjusted loose cash flow of CHF 359 million. Let me see how we did it.
Working capital decreased to CHF 63 million. Accounts receivable increased thanks to the expansion of our business, but intelligent inventory control greatly mitigated the effect of higher commodity prices. However, the other seasonal source models and the temporary closure at Wieze have resulted in a build-up of stocks of cocoa beans and other uncooked materials.
Both effects were largely offset by higher debts. Interest and taxes paid amounted to CHF 184 million. The accumulation was basically due to higher benchmark interest rates, while taxes were lower. We continue to invest in our long-term expansion capacity and expenditure of CHF 276 million approximately the same point as last year.
The reported loose money amounted to CHF 266 million because the effect of cocoa beans considered as RMI was negative this year compared to last year. Net debt was reduced by an additional CHF 82 million. Considering cocoa beans in inventory as RMI, adjusted net debt decreased from CHF 198 million to CHF 350 million at the end of August 2022. The IFRS 16 rent-like debt ratio remained more or less robust at CHF 265 million.
We are now coming to the end of the monetary review. Let’s take a look at our balance sheet and indexes related to slide 23. Our net operating capital creation increased to CHF 1293 million as a result of business growth. emissions at 14. 8% thanks to the staggered combination reflected through the accumulation in recurring EBIT.
As discussed on the previous slide, adjusted debt decreased further, resulting in a low adjusted debt-to-EBITDA ratio of 0. 6 times. Finally, let me tell you about dividends. The Board of Directors will propose to the Annual General Meeting of Shareholders a solid dividend of CHF 28 consistent with the share.
This corresponds to a payout ratio of 43% of the reported net revenue source once it exceeds the target ratio of 35% to 40% due to the above-mentioned one-time effects on net profit. This year’s shareholders’ meeting will be held on December 14 and will again be with the non-public participation of all shareholders.
And with that, I pass it on to Peter.
Pierre Boone
Thank you Ben. Let me share with you a few words about our long-term strategy and how we should continue to raise prices in the future. As you know, we have been and will continue to be very consistent in our long-term strategy. strategy. We will continue to drive expansion on the basis forged from our 4 strategic pillars; expansion, innovation, containment load and sustainability. He will be in the yields of intelligent execution and money generation.
I see opportunities to further leverage our footprint around the world, from evolved markets to emerging markets. We have established our first chocolate production footprint on the African continent and are building a factory in Canada to respond to basic trends and also as a leader in innovation. to push the boundaries, for example, with the momentary generation of chocolate that we have presented.
Through scale, leverage and power across the price chain, we will continue to create charge leadership. Our new Business Centre of Excellence in Malaysia is a wonderful example of how we need this.
I am very pleased to see that our efforts are identified through the money markets,
With that of our customers, we have a higher proportion of sustainable products sold. Each of the two products we sell is made up of one hundred percent sustainable cocoa or chocolate. Our purpose of making sustainable chocolate at home is, in fact, a reality.
In early December, we will release our Forever Chocolate progress report. And later in the year, we’ll unveil our most explicit goals for Forever Chocolate. So, stay tuned for what’s to come.
Ladies and gentlemen, as many of you know, ESG is the means of reporting on non-financial threats in origin chains. Barry Callebaut is committed to managing all of our operations with transparency and integrity, adding ESG policies and threat reporting.
And I’m proud that our sustainability efforts have once again gained external recognition. Sustainalytics ranked us number one among nearly six hundred corporations in the food and beverage industry for our supply chain ESG threat management.
At Board level, I am pleased to announce that Thomas Intrator will be proposed as a new Board member at the next General Assembly. Thomas is a Swiss national, has developed his experience in his distinguished career at Cargill and brings deep energy expertise. , logistics, industry and threat management. All existing Board members shall be eligible for re-election for an additional one-year term.
Ladies and gentlemen, in conclusion, backed by the coherence of the expansion strategy and the strength of the innovation pipeline, we are on track to achieve the medium-term objectives in the 2022-2023 fiscal year. As you know, our medium-term direction is a volume expansion of 5% to 7% and EBIT above volume expansion in local currency, despite any primary unpredictable events. In the first quarter of this fiscal year, we will provide an update on our new direction over the medium term.
And with that, gentlemen, I conclude this presentation and I would like to open the field to questions.
Q&A session
Operator
The first comes from John Ennis of Goldman Sachs.
John Ennis
Yes. Hello everyone. Thank you for answering my questions. My first considerations are the closure of the Wieze site. I guess, could you give us a little more detail on how you calculated the provisions you recorded in relation to this exceptional amount of CHF 77 million?- Are you sure that it will not be mandatory to book additional one-time ebookings in 2023 in connection with this closure?And give us an idea of how consumers react and how smart their relationships are?This is the first one.
And then my first moment is a bit like a verification actually. You say you’ll take inventory of the new instructions in the medium term with the three-month sales launch. Just an explanation of what exactly you mean by that?I guess it’s going to give a new address set after 2023, but I just need to verify what you mean by this update.
And then, my last query is about the functionality of the EBIT margin in Asia-Pacific in the current part of the year. It failed about 250 basic problems year after year. And you discussed some ongoing investments, but can you detail what?What exactly is their contribution to margin relief?And perhaps in this context, to what extent did the functionality of gourmets in the current part of the year for this region also contribute to margin relief?Thank you.
Ben of Schryver
It is ok. Let me start with Wieze’s effect on overall net single costs. We therefore have 76. 9 million francs. This therefore includes, first of all, transport, garage and destruction and disposal of infected products. But, of course, also the cleaning costs, adding the disassembly and assembly of abnormal lines. Then you have a component similar to contractual obligationswhich we also have with customers.
As you can imagine, the smart news is that we needed to capture the products before they entered customers’ markets, but some of our customers were also affected. Of course, we also have your contractual obligations similar to agreements with customers.
We have carried out a transparent and comprehensive assessment of the overall impact. And, to the best of our knowledge, we have captured all the non-recurring elements of the last fiscal year. This was based on a thorough and detailed investigation of the total number. Yes, of course, there is a figure that we have published, but rest assured that there is a lot of idea and also a lot of details. And we’re sure we want to do it, as far as we know, we’ve captured it all in last year’s unique results.
Pierre Boone
Maybe then I can replace Ben and reflect on consumers because, well, of course, it had an effect on them. But the first reaction we got from consumers was an appreciation of the systems in which we knew the problem, the contamination of our line in a factory in Wieze. So tell them and therefore no product has reached the retail market position in the end, which, of course, only speaks to the food quality systems we have put in position to identify this.
However, we know that for many consumers they want, of course, products and they want them outside Belgium. And in this sense, of course, they were in need. And to this day, we’re still trying to reach those volumes. We were inspired by their cooperation. We were inspired by how hard they tried to work with us to find a way out.
In cash, I think, we see the end of the tension at the close of delivery. At Gourmet, of course, we still have a bit of pipe to fill and we will do so in the coming weeks.
So, as far as the medium-term forecast, well, let’s close the 3-year medium-term forecast that we gave two years ago in this fiscal year. to medium-term forecasts, so it’s smart news. However, we also perceive that it is attractive for you to hear what the new instructions are in the medium term. And therefore, we need not wait more than at the end. of the first quarter when percentage with you the expansion of the volume for this first quarter. Therefore, at the end of the first quarter, we will give you our new medium-term direction for the next 3 years after finalizing this medium-term guidance at the end of 2022-2023.
Ben of Schryver
But then, in APAC EBIT behind, yes, correctly, I pointed out very clearly, is that we have made initial investments. So don’t forget that we made a small acquisition in Australia. Then we put a new factory on new production lines. Of course, this was the era of the full COVID pandemic when the entire Australian market was also closed to tourism.
So, of course, we also have to catch up in terms of volumes. We have the installed capacity for growth, we are in control of your operation. Sales have not yet been so fast, but at the same time, I am very convinced that it is now opening. On the gourmet side, of course, a market like Australia is also largely based on tourism. It opens now.
The dynamic is increasingly positive. So I’m very convinced that the next medium-term forecasts and also next year’s, we’ll also see a lot of expansion from there. That is also the main reason. There’s a wallet in that: in the Asia-Pacific markets that have also been a little harder to think about over the course of the year. There have been blockades again, specifically in China. However, the general expansion is there. But, yes, on the EBIT side, a little bit of what we normally deserve to be. Yes.
John Ennis
Thank you so much.
Operator
The next one comes from Jörn Iffert of UBS. Please continue, sir.
Jörn Iffert
Salut. Et thank you for answering my questions. Three to four questions, please. The first would be, can you please comment on how you expect the timing of outsourcing agreements for your fiscal year 2023?And also if you already see a negative effect on your Gourmet business from the weakness of consumers across Europe?And what do you think of the solidity of Gourmet?
The query at the moment would be, please, I think its underlying EBIT of CHF 625 million looks pretty solid, perhaps adding that the effect on the CHF 20 million volume it has would end with an EBIT of CHF 645 million. When you say that you would possibly be expanding volumes by 5% to 6% in fiscal 2023 and you have EBIT expansion on top of that. This would perhaps bring me to an EBIT of CHF 680 million, CHF 690 million for the 2023 monetary year. But do we want to take into account anything about the energy rate, existing hedges or any other negative aspects at the end of the day, which may have an effect on EBIT in fiscal 2023?
And the third and final question, please, Russia. I think you still have your operations going on there. A technical question, how can you make sure that the accountants are looking for the right numbers and that everything is one hundred percent safe?, what are we used to by Barry Callebaut regularly in this region?Thanks a lot.
Ben of Schryver
Need to start outsourcing?
Pierre Boone
Yes. Excuse me, I ask the first question.
Jorn Iffert
And can you comment on your outsourcing schedule? That is, are you sure of the 30,000, 40,000 for the year 2023?And also in Gourmet, do you see here a weakness of consumers infecting your customers?
Pierre Boone
So, as you well know, outsourcing is one of our priorities. We never know precisely when it will happen. Of course, very pleased to announce the subcontracting agreement in Morocco, even if it is small and will not bring all the volume we need. The pipe is good. I hope that next year we will put into effect the instructions we have on this front.
As we’ve discussed several times for times like this time of crisis, those are the reasons why the discussion about outsourcing is interesting. These are the figures, the 36,000 last year were expelled from Eastern Europe. We go out all over the world, we have projects underway right now and we remain convinced that it will be a wonderful engine of expansion for our results.
At Gourmet, we also keep an eye on the economic outlook. We’ve also closely monitored the trends we’re seeing in out-of-home catering. And there, of course, we see a certain decline and we can expect some decline. In our numbers, it is still very difficult to see. As you have seen, the fourth quarter is still very strong. We have faced challenges in our Gourmet product portfolio, especially, of course, the global Callebaut logo, which emerged from Wieze.
However, we see a strong charm from consumers, to whom we say we want the market, but we are not completely dependent on the market. We have shared in previous conversations that we have expanded our success in the markets by expanding the number of distributors. We also have more direct consumers on Gourmet and this continues to contribute to Gourmet’s strong positive growth.
So right now, we don’t feel like it has an effect on the economy there. We will continue to monitor closely. What we are indicating, however, is that in the first quarter we will have an impact on the Global Brand Callebaut pipeline, because of course this pipeline takes a while to empty, but Wieze is not generating at this time, it was yet. That means we now have to catch up and that will have an effect on that view only in the first trimester.
Ben of Schryver
Yes, I think it’s a smart bridge at the time of consultation on the results. First of all, I do not give an express recommendation in the short term, only in the medium term. But what I can, as Peter indicated, of course, still an influence of Wieze in the first quarter on our reported results. We returned to full capacity by the end of October. And as Peter said, of course, the Gourmet influence has been delayed a little longer, since we manage our stock first. Of course, we also want to fill those stocks. That’s the only facet I see.
The only other facet you want is, of course, translation effects. He has noticed a big shift from the euro to Switzerland in the current part of the year. This is, of course, anything you also want in your style. But other than that, in terms of hedging against inflation, etc. , our increased cost style has been physically powerful and proven.
Look at this year’s result, it wasn’t a simple year either. There have been many increases in supply chain costs, increases in energy costs, etc. We control to achieve this. So I don’t expect any effect on that.
On the Russian side, first of all in accounting, we have put in place falsified controls. That is a fact. So I don’t expect anything to reposition myself here. We have a strong team on the field. There is a local team and we have supervision, also independent supervision. However, having said that, we are here in maintenance mode. We’re not adding any investment in Rusia. Se it’s just about keeping our assets that we have now in our business that we have now.
Jorn Iffert
Thank you so much.
Operator
The next one comes from Jon Cox of Kepler Cheuvreux.
Jon Cox
Yes, thank you guys very much. And thank you for arranging the call. I guess everyone will be at the pump a little earlier. Some questions for you. Regarding the next medium-term plan, Peter, you discussed the 3rd quarter. Historically, you gave it with the effects of the full year a year in advance. And maybe that prevents you from going back to that: your original 4% to 6% volume expansion target?How sure are you of that expansion, or do you think the company has become so big, maybe the opportunities for expansion?there? That’s the first question.
Second question, only at this existing level. Obviously, you have to do an expansion of more than 5% this year on the volume side to succeed by an average of 5% over the last 3 years. I wonder about that, and my colleague John asked earlier, quite a bit, what are your consumers saying?Have you noticed any consumer attrition, or has anyone indicated that we’re not going to come back to you as a result of what happened and maybe the effect on volume isn’t just saying the first two months of the year, yes.
So, and then, just to get in touch on some of the details, can you give us a concept of capital spending, the tax rate, the interest rate, that kind of thing right now, for the existing fiscal year?Thank you.
Pierre Boone
So, in our opinion, this time we had a lot to explain in our annual results. In addition, we sought to have only the first quarter back before sharing the medium-term plan. This is a call I made, please do not read any consideration about our potential for expansion. We are a developing company. We will continue to be a developing company.
I hope you noticed the results. Of course, a very strong underlying business and that can only give us more confidence that the style is working and even working very, very solidly. We are seeing strong volume growth. We see profit developing faster than volume. Now they know me a little bit, I’m focusing on the last part. In fact, through diversity through innovation, we can grow our business and we can grow it intelligently.
So please don’t read the announcement at the end of the first quarter. Anyway, we are sure of our business, we just need to take a few more months to prepare and then percentage the new instructions in the medium term for the next 3 years.
As far as consumers are concerned, again, yes, you have surely made the right calculations. We want to be above 5% to meet the medium-term forecast. Hey, of course, we’ve done those calculations too, and we’re sure we’re going to get there.
Are there any consumers who have been greatly affected by the closure of Wieze, of course?We know that Wieze is a massive site, 1 million liters of chocolates per day. This capacity restriction exists. That made the painful one, however, of course, we have more than the Wieze factory. We have 64 factories.
We leveraged our net source of income at the combine to help customers, anywhere we could, if they weren’t completely dependent on the Belgian receivable. We went the extra mile to seek answers with them. And, of course, they’ve been painful, but they’ve also built some credibility.
I firmly believe and I believe that consumers also with us. We have responded well to this crisis. We will come out stronger. So, I can believe that some consumers were surely forced to buy from competitors, but I’m not worried that we’re finding a way to give back, for consumers to get them from our network.
Ben of Schryver
It is ok. Just in the practical aspects, Jon, in the last part. First of all, on the tax rate itself, of course, you’ve noticed an effect on. . . A bit of an effect on the composition of the countries there, so our effective tax rate was quite low in the last fiscal year. And this is due to a combined effect, but of course also then, in absolute quantity, connected of course to the decrease in profitability. There is nothing new express to mention here. There have been no primary adjustments to the tax rate in the last fiscal year.
In the aspect of CapEx, he sees a similar point to last year. Therefore, we continue to invest in our business. You’ve also noticed our announcements of an entirely new plant in Ontario, Canada. This is a prime investment for better chocolate for you. This is precisely the kind of product we want, as Peter mentioned, to improve our range. But of course, we’re not afraid to put CapEx that too. So, however, there is nothing express to mention in terms of nuts and bolts in the look of CapEx last year. So it was pretty flat.
Jon Cox
Thanks.
Operator
The following one comes from Lauren Molyneux of Citi. Please skip ahead.
Lauren Molyneux
Hello. Thank you for accepting my question. I just had a couple. So, I know you’ve talked a lot about the medium-term forecast of that 5% to 7%, but I wonder if you can comment a little bit more on what that implies in terms of the underlying. Order volume of chocolate in the real-time market.
I saw on one of the slides that the European market seemed to be in decline. So what do you think there? And I guess, sort of, how healthy is this end market too?And then, I also sought to talk about G’s performance.
And then finally, just because it happens to be an issue with some other companies, how involved are you with the potential effects of destocking through your customers, that’s something you hear from some customers?And do you have a smart view of the stock point in trading? Thank you.
Pierre Boone
So, let’s start with the market. So, of course, we are blind to the market. We see around us that the economic outlook is less positive. We stick to Nielsen, we stick to a market, and obviously we see trends continue.
However, in general, and we see that this time too, if you take a look at the market in general, the market in general is quite resilient, even in times of economic recession. We’re not talking about massive spending. So, you see consumers switch from one logo to another or from a promotional package to a package instead of a simple package. That’s the kind of movement you see in the market. In general, we don’t expect any kind of dramatic change. Relief in the market.
But I think the smart news about Barry Callebaut and what we’ve shown time and time again is that we, sure, feel the market, but we don’t count on the market, because we still have our other expansion resources that are constantly growing well beyond the market.
We talk about outsourcing. I also remain very, very proud of our biological growth, our competitive strength in the 4 pillars of our strategy, I think, to differentiate ourselves from the competition. And as a result, we’re still gaining a lot of market share. Then, from there, of course, we continue to grow, expanding in the market with our portfolio, but also geographically.
So, and it’s attractive to take a look at some old numbers, which have been piling up, because when we went through the currency crisis, we saw, hey, the markets fell a little bit by 1%, 2%, here in terms of data for 2009, where the marketplace was down 1. 6%. But Barry Callebaut was up 4. 1%. In 2015, the market fell by 1. 4%. Barry Callebaut rose 4% again.
And if you just look at a longer constant period, not knowing exactly where the market will end up and look at the constant period from 2000 to 2022, the market has grown by 1. 3% annually. Hey, that’s what we say. The marketplaceplaceplace is developing between 1% and 2% on average. Barry Callebaut grew by 6. 2% over the same constant period. So, emphasizing that we have capacity and we have proven time and time again that we can grow our business and grow particularly above the market place, as we also did last year.
Ben of Schryver
Yes. Only in Gourmet
I repeat the same thing, and that is that when you take a look at the total of Barry Callebaut, you need Gourmet to grow faster than your medium-term forecasts and that cocoa is a little decreasing and, on average, you get it between 5% and 7%. . So, overall, it is again, it also shows our strength in the fourth quarter that we can still grow our Gourmet department very strongly. 8% is not a bad number. Sure, we’ve all gotten used to it in recent quarters. to 20%, 20% more and we are normalizing our business more after COVID-19, however, 8% is still a very high number.
Pierre Boone
I can only verify that Ben has wonderful confidence in the strategy we have put in position for Gourmet. And as we explained earlier, we focus a lot on the driving range. It just keeps growing. We are recruiting new suppliers because we have just shared Levapan, for example, in Colombia. There is a whole new market. Need to identify new suppliers in existing markets. Therefore, our success becomes better.
And we’re getting smarter and smarter in this shared group style where we’re not only pushing our products into distribution, but also, with the help of virtual, of course, with the fitness of the Chocolate Academies, we’re more effective in grouping those products across. So the fourth quarter, I think it is: you see a mirror image of Wieze. I think I see the same thing in the first trimester. After that, I am sure that we will continue to push Gourmet.
Ben of Schryver
And Lauren, with respect to her last point on the storage effect, we don’t see any evidence of that right now as such in our business. But that doesn’t mean it can’t happen too. We have some evidence or comments indicating that we also see it in our business.
Operator
The next one comes from Reuters’ John Revill. Continue.
Jean Revil
Good afternoon. Thank you for answering my questions. A couple if I can. You made a kind of comment about the costs of cocoa and sugar in the year. I was wondering if you could give any indication of your expectations for the coming year regarding cocoa and sugar costs.
And then, secondly, at the Wieze plant, can you give us an indication of how the classes are learned?Are we going to see a replay of a trial like that again?Thank you.
Ben of Schryver
Yes, let me take the first one first. Of course, I also don’t have a crystal ball on what the markets will do in the future, but I can communicate a little bit about the basics. First, on the cocoa basics side, the overall source is still pretty solid. They come from a very strong source where demand has been affected, so we had a surplus there. So overall, I expect it to be pretty quiet, generally in terms of commodities, which you’ve noticed with other commodities. , because the source and demand are quite strong. There are also a lot of beans at this time. We see no shortage. Therefore, I do not expect any adjustment: primary adjustments, of course, based on the basics. I don’t have a crystal ball about what’s happening in the trading market.
On the sugar side, the market environment is also more challenging. You’ve already noticed, especially in European sugar, it’s pretty solid. We don’t see any additional indication of increases at this stage. But it is also vital to realize that input costs are emerging. Energy costs are surging in Europe, so this is, of course, a complicated situation. And that’s why I don’t expect costs to come down temporarily either. In Wieze, possibly be to take on this.
Pierre Boone
So, I’m a little nervous about this question, because I don’t forget that last time there was also another question, hey, is this going to happen, and we also said it at that time. We are a food company. The threat is there. But we will surely be informed of this. And I think there are two things. On the one hand, we will do everything and we are already doing everything we can to make sure that infected products do not enter our lines. Should this happen again, we want to make sure they take effect. on is much smaller than in the case of Wieze.
However, let me take a step back. This is an exceptional situation. Lecithin As far as I know, in food history, there has never been salmonella contamination in lecithin and is a low risk overall. In addition, the unusual practice in the market is that in low risk, it will depend on the certificate of analysis of your supplier.
And that would be enough for crude if it has a low threat of entering our factories. That’s where we learned about all the low threats, now there’s positive rejection. Then we check them when they arrive. Surely we make sure to know the product that suits our ranges. And, of course, we also make sure that the suppliers we work with are audited as they have been before and, of course, additional attention.
So what we see is that we’re happening – in a place as vast as Wieze, you see more segregation of flows. This case was as exceptional as lecithin, because it is a small uncooked curtain to be honest. But since it was small, it fed all the lines. It can go a long way and therefore have an effect on our business. And that’s what we’ve already solved. Now he sees a separate dosage type of lecithin.
Then, in this sense, we will surely come out more powerful. To be honest, the food industry in general will come out more powerful. We’ll make sure it is: the threat is mitigated even more than ever before, but I can never say no, never, because we’re a food company in that sense, there’s also some threat. But know that we have put all the movements in position, and we have put all the movements in position and we will do it even more if we consider it necessary.
Jean Revil
So how much can you say mitigation is?I mean, how much do you think the threat has been reduced?I know you can never say never because it’s impossible. But has the threat of pollution been particularly reduced now?How would you describe the kinds of things you’ve put in position to prevent this from falling again?Was it – was it advanced thematically in the protection of the plant or how would you describe it?
Pierre Boone
In fact, I can say that it will not take place on this scale. Let’s not close our eyes, every year there are multiple cases of salmonella contamination in the agri-food industry. But I think our learning and explanation of why this case has to become so shocking to us is that it actually brought down the biggest chocolate factory in the world, and it doesn’t deserve to happen again. So, to restrict the effect, of course, I prefer that no infected product approaches. one of my factories. We will do everything we can to make sure this does not happen. But if that happens, it would deserve not to have an effect like the one we have had on the scales and that of course we can assure you.
Jean Revil
Thanks.
Operator
The following is by Andreas von Arx de Baader-Helvea.
Andreas von Arx
Hello, good afternoon. Could you give me the figure of biological expansion in the volume of the organization for 2021, 2022?I missed it a bit or it can just give us the impact on the volume of your acquisitions last year. That’s my first question.
The consultation at the moment would be related to unique pieces for next year. So, to be clear, I want to say that you expect a decrease in volume or that it will have an effect on Wieze’s volume in the first quarter. So will this still lead to Wieze-related changes between reported and recurring figures in 2022-2023 in EBIT, or is all this already included in the figures it has booked for 2021 and 2022?
So, just one question on the topic of stock clearance might be a little different. I mean, if you look at orders from your customers’ holiday activities and, given the effect we’re seeing on customer sentiment, do you see an effect here in terms of volumes being requested or could it be less from your customers than you would have had a year ago?
And then, the last question, I mean you have an increased cost model. I mean we have now, I mean since August, an increase in the value of cocoa, we have significant increases in power and we expect significant increases in hard labor costs. I mean, as I perceive it, he’s very sure of himself that he can transfer that to our profitability. But it also implies that there could be an impact on volume. , as we saw in 2009 and 2015. Is this the correct conclusion of the statement?Thank you so much.
Ben of Schryver
It is ok. So let me, thank you, Andreas. So, first of all about biological expansion, I had to control myself. Therefore, the overall activity of chocolate increased to 5. 9%, so it is not the total number, but the activity of chocolate. Organic expansion was 4. 9% excluding CCE, right?And Claudia is also helping me there. Thus, the total number is 4. 5%. Sorry, I had to check this one because I didn’t know it by heart. So overall, that’s an ECC that has an effect of 18,000 tons for the whole year. So you also have the total number there.
Now in the EBIT consultation, non-recurring EBIT for next year. There, we are convinced that we have captured the totality of the non-recurrence of the monetary year 2021, 2022. As I said earlier, to our most productive knowledge, we capture. So because it was based on detailed research, we don’t expect to come back with a single article in fiscal year 2022, 2023. So, based on the detailed research we’ve done. You can, yes.
Pierre Boone
So we are – as I said, we are not naïve Andreas. We see the market there. We see that consumers are worried about the effect the economic downturn will have. Of course, we see some trends, as you probably also see, from personal labels to promotional packages, multipacks. However, we have shown that, as I said before, we surely have an effect through markets, but we can expand beyond the market thanks to the other expansion resources we have.
So right now, in every region, we’re seeing consumption patterns that are fully converting. However, we serve the industry from the smallest to the largest. And that, of course, gives us the luxury of tracking the volume where it goes. It will not go to the market and if we see a decrease in the contraction of the market in general, we will try to compensate by gaining share.
We will try to compensate for this with an additional partnership, which of course will also be our fair position or they will move from the captive market to the free market. And overall, our expansion is also driven through new product categories and emerging markets. , in this sense, surely aware of the economic prospects. Am I worried about our volume outlook, not because I’ve committed to offering the medium-term forecast this year?
Andreas von Arx
Thanks.
Pierre Boone
And then the cost style more now.
Operator
The following is by Nathalie Olof-Ors of Agence France Presse. Continue.
Nathalie Olof-Ors
You are not the only company that has had salmonella, bacteria or E-coli, or there have been several food companies in the market that have had serious incidents. It’s a succession of remote incidents, has there been any adjustment in the supply chain or after the pandemic that has disrupted the workflow of food companies?
Pierre Boone
So, as we all know, this is an incredibly confusing period, where we see a lot going on in the market. Absolutely, the war in Ukraine, for example, has put pressure on sunflowers and therefore we are also seeing some sources. Routes are cut because the cost of shipping is too high. So, I think there’s a dynamic where we are forced to work with new players and see new players again.
Should that lead to those kinds of disorders even more?I don’t think so. We just want to have the right kind of field in position to mitigate threats and make sure that if there’s a bigger threat, we make sure we check that plugin, do more audits, and make sure the threat possibly doesn’t have an effect on our business in the end. So things are surely happening. So, answer your question, surely in the context of suppliers where we see changes where we want to work with our suppliers, however, this should not cause further incidents in our opinion.
Nathalie Olof-Ors
It is ok. Thank you.
Operator
The next one comes from Pascal Boll de Stifel. Continue.
paschal bowl
Yes. Hello everyone. I heard that you are pretty sure about your underlying expansion momentum, but just to make sure, reiterate your medium-term forecast. Is it a big component of the underlying expansion and the opportunities you see and also some visibility that you see in your volumes, or is it also a big component of a technical effect from the fourth quarter that was very weak this year and will be much more powerful last year, notoriously — and next year. I am sorry?
Then, about outsourcing during COVID, I don’t forget that he talked a lot about a management pipeline that was not done and it was not imaginable at that time to stop at new sites and reach an agreement on new contracts. It turns out that we haven’t realized much catching up since then, although I see that I think outsourcing this year has also contributed about 5% to its growth. But I still wonder if there will be more to come.
Then, in relation to Russia, could you give us more main points about how this company is operating lately?We’ve also just heard about companies looking to go to market. Are there any new considerations?
And then, despite everything about cocoa, he talked about an improved combined index. In my opinion, this also deserves to help you in terms of profitability in the new economic year. And what do you expect from the market as a 2% to 3% expansion, or what is your belief here?Thank you.
Ben of Schryver
Yes. First of all, let me also answer about last year’s medium-term growth. It is not a question of strategy or not. Overall, it is: our medium-term forecasts are a range. And we’re confident we can do that, because of the underlying business we have. We are confident in ourselves due to the maturity of our company. In all regions, etc. , it is there. So otherwise, we wouldn’t come away with this statement. So don’t look to read too much into the strategy, yes or no. So, of course, we have an orientation that is a range. And then, of course, we do not give you main points in this range.
Pierre Boone
As it outpaces volume growth, this is, of course, our concentrate. I can also tell you to think a little bit about my own leadership and, as I said before, and what you can also see in the effects of the Americas. I think we need to continue to grow our business. We are a developing company. There are many opportunities for us. But I’m looking to bring it with an even bigger field in combine management management, so the combine produces customers, of course, an additional focus on innovation so that we can drive price scale. . In this regard, we are also convinced that we are setting up medium-term forecasts from the point of view of EBIT.
On subcontracting, yes, the third part is, of course, 35 000 to 40 000 tonnes. It’s less than in the afterlife, but we’ve intentionally reduced it. We say there are many outsourcing agreements we can sign, but we also have to see if we are interested enough. And because in the end we have growth, but we also have an ambition for profitability. Right now, we see that if you’re in the afterlife, if you’re new to a market, they occasionally like to have large outsourcing contracts to build their footprint. The exciting component of the last few years, we’ve also noticed that small corporations like the ones we’ve noticed in Southern and Eastern Europe say, hey, I want a component like Barry Callebaut.
Therefore, I do not wish to invest in my wealth, it is a shame for capital. I have other put options where I can invest that capital, but I also want Barry Callebaut’s kind of strength and strength of innovation and sustainability. And we don’t. . . – Of course, we will take advantage of some of the opportunities that come our way. We will not be forced to sign a subcontracting agreement. It’s not attractive. But in the end, outsourcing remains as attractive as in the past.
On Russia, Ben already has an idea about it, there are no new considerations. It is a local operation for a local operation at that time. We don’t invest in that network. We only stay for local and foreign clients. And then maybe you take the combined ratio.
Ben of Schryver
Yes, combined reason, Pascal, you’re right. Then he saw that 3. 6 was covered more definitely towards the end of the year instead of 3. 5. That’s a small increase. This, of course, has a delay in the schedule that has an effect of six to nine months. But of course, if there are no other replacements, you will see a slight – other innovations there on the cocoa side. But this can also replace quite quickly, as you also want to factor in your input costs, as well as your transportation and energy costs, etc.
You make sure it moves in general. I think you have to get back to that. But overall, I am very satisfied with the cocoa powder side. We have rightly focused on cocoa powder, why?Because we can raise the price a lot. Cocoa is not just cocoa powder. We have a lot of cocoa powder with high prices where we can also, as a company, get the right creations for our customers. While on the cocoa butter side, it’s a question whether it’s Barry Callebaut cocoa powder: butter or not, it doesn’t make a difference as such. So, for me, in the context of cocoa leadership that we’ve done in the past, the right direction as well.
Having said that for us, of course it is very vital — we are our largest supplier of cocoa. We do not necessarily have to look for the position in the market and we can be selective when we want. Relationship also becomes unprofitable, of course, we are also very cautious there. We only compare it with a natural grinder where you have to unload it in the market position. This is, of course, also the power of Barry Callebaut. This is, of course, a component of our strategy that we put in place years ago, having pointed our leadership in cocoa towards this side.
Pascual Bol
So, if I perceive correctly, Peter, will we be expecting more small outsourcing contracts than large contracts that we saw after 2010 in the coming years?
Pierre Boone
I’m open to very big deals if they make sense, of course. And we’ve signed some important outsourcing contracts, some of which I’m very proud to have renewed. So you’ve noticed the resurgence of Hershey. we also thank you for helping us become the market leader in North America. And its scale helped us, in that direction. Of course, there are positions where we no longer want that where we are the market leader. We are much more on the hunt for the types of smaller company outsourcing arrangements.
So I don’t rule out the big guys. They are a wonderful way to identify ourselves, to expand in the market, to have a footprint in the market. But hey, I’m excited. As you just heard about the little ones too, because I think in the end they see not only someone who can supply them with a product, but also someone who can innovate with them, who can drive the sustainability program while helping them be the leaders of the charge or at least have a smart charge that is worthwhile for the products they buy.
Pascual Bol
Thanks.
Operator
The latest for today’s call comes from Barclays’ Alex Sloane. Continue.
Alex Sloan
Yes. Hello. Every afternoon. Three queries from me, please. Just the first one. Recurring profit has increased markedly through double digits. It has a strong balance sheet, as he noted. So the question would be, I suppose, why didn’t the dividend increase given that the recurring net profit payment is less than 40%?
Second consultation for Peter, let us return to the new medium-term instructions. Are there any knowledge issues you are looking for in the coming months to make a resolution one way or another on medium-term diversity of orientation?, or is it more than just need to talk about this new diversity of orientation to today’s edition, which evidently has moving parts?
And finally, only in the new generation chocolate, it looks really attractive on paper and I am sure that it will interest its consumers a lot. What capacity do you have today for this product compared to how much you will want to invest over time to expand here?Thank you.
Ben of Schryver
First, let me answer about the dividend flow. You pointed it out correctly. So when you look, the payout rate is over 40% when you look at the reported result, when you look, but even when you look at the recurring result, it’s still 36% faked. This is in the diversity of 35% to 40%. So don’t get too close to reading too much. This is a proposal for the AGM. Of course, we sought to make sure that there was also a strong environment because we are confident in ourselves in general that of course we have captured a non-recurring component that is really us and that we can also look to the future. And that’s why we did it, we’re offering it this way, but it’s within diversity. So, it’s not that we’re not recurring that we’re also out of reach.
Pierre Boone
And on the intermediate orientations, the new intermediate orientations I love knowledge. Step later. But you can also expect him to think we are confident in our potential for expansion. If Wieze hadn’t happened, we would have had incredible expansion throughout the year, an expansion of 5. 3% is significant compared to the market. But of course, it would have ended up much higher than that. So, in general, the dynamics of the business gives us a lot of confidence and I don’t expect us to locate many knowledge problems that will take us away from the direction that mine is taking. now.
Surely you are right. I think this time we felt we had a lot on the calendar and we have a lot to explain. We feel that the timing of the first quarter is a more opportune time to release medium-term forecasts. So pay attention to this and we will do it. Prepare a transparent explanation.
And finally, the generation of moments, I take that one. I still have a big marketing heart. So, and I was last week. Yes, it is a shame for those who are not there, but wonderful for those who are there because you can enjoy a chocolate of generation of moments. And the evidence is in the tasting. As of course with chocolate, but especially in this scenario because good looks are what we have discovered in years and years and years and years of understanding the cocoa bean.
I have explained to you several times that 10 years ago, when I started as Director of Innovation, I sought to perceive all those precursors that are in the cocoa bean for health, but also for flavor. And we started mapping that. In addition, we start, of course, they inform us a lot about the treatment. And those two sets, adding the cocoa bean, perceiving how to best process that cocoa bean to obtain and highlight the flavors of an espresso type of bean, led to the moment generation of chocolate.
So wonderful what we say that the purity of the flavors of cocoa is manifested in chocolate because we perceive this cocoa bean very well. I know how to treat it. We don’t want to mask all kinds of flavors. And that’s why it definitely has a label, which is just two ingredients for a black one and 3 for one for milk. And the most exciting thing is that from now on or from the moment of generation, cocoa with chocolate will be the first and sugar will be the last. So you have 50% relief from sugar which is good, close your eyes when you taste it, you may not say it. That’s not your experience.
It’s a very lovely cocoa flavor emanating from chocolate, a very enjoyable chocolate experience, but it comes with such an undeniable label. So, I think it has 50% less sugar, it gave us the confidence to say hey!We were given a paradigm shift, that’s why we call it the chocolate of the generation of the moment because I’m probably not a general consumer, but now I’ve tasted it several times. I don’t see any explanation for why going back to the first generation. Because I think it’s chocolate with a delicious taste and has 50% less sugar, which I find convincing.
So how long will it take? Of course, we talk to our most important customers. But we tell them they need 12 to 18 months to get this to market. So let’s give them time. It’s huge, as you may have noticed in the news, and we expect a lot from this new innovation.
Alex Sloan
Thank you so much.
Pierre Boone
Thanks.
Operator
Gentlemen, that the last consultation of the phone.
Claudia Pedretti
Merci. Et with that, we conclude today’s presentation. Of course, we will also be available for any other questions later or tomorrow if you wish. Thanks a lot.
Pierre Boone
Thanks.
Ben of Schryver
Thanks.