Barry Callebaut AG · SIX:BARN
Barry Callebaut — Investor Day (October 2014)
31 slides from Barry Callebaut's investor day presentation, Oct 22, 2014
Slide 1: Investors & Analysts days - 2014
Investors & Analysts days - 2014 Victor Balli - CFO Belgium - October 22, 2014 October, 2014
Slide 2: Some additional information from the CFO
Investors days 2014 Some additional information from the CFO Understanding commodity risk management at BC Working capital, capex, financing Wrap-up Page 2 October, 2014 Investors days 2014
Slide 3: Bean Needs
Bean Needs BC is sourcing >1000 KMT (25% of the World Crop). Exposure to the major origins is well balanced, respective to local crop size. Sourcing volume in kMT Sourcing FY 13/14 per origin (in %) Other Nigeria Ecuador Cameroon IC Brazil Indo Ghana Ivory Coast and Ghana are the largest sources of
Slide 4: Chocolate main ingredients past volatility
index: Jan.07 as basis, all prices in USD, 2nd position for futures 0% 50% 100% 150% 200% 250% 300% -100% -50% October, 2014 Jan 2007 Apr 2007 Jul 2007 Oct 2007 Jan 2008 cocoa (Liffe) Apr 2008 Investors days 2014 Ingredients Risk Management Jul 2008 Oct 2008 Jan 2009 Apr 2009 Jul 2009 Oct 2009 sugar
Slide 5: Major items to manage while sourcing beans
Cocoa Sourcing Management Major items to manage while sourcing beans Next to physical risks (suppliers, quality, supply chain etc) following price risks are terminal market related Bean equivalent (BE) Differentials (ratios) Structure Arbitrage Page 5 October, 2014 Investors days 2014
Slide 6: The Cocoa Terminal Markets
Cocoa Sourcing Management The Cocoa Terminal Markets London’s LIFFE futures exchange New York’s ICE futures exchange Price in GBP/ton Price in USD/ton 1lot =10mt 1lot =10mt Futures volumes 2013: 5,125mio lots Futures volume 2013: 6,583mio lots Options volumes 2013: 1,048mio lots Options volume 2013:
Slide 7: Cocoa Terminal Markets: Who's involved?
Cocoa Sourcing Management Cocoa Terminal Markets Who’s involved ? Commercials: industry, trade houses, grinders, origins / producers Speculators: Hedge funds: Macro funds: Actively managed, commodities specialists, fundamental analysis (upto $6billion under mngt) System funds: Computers trading off
Slide 8: Cocoa Terminal Markets
Cocoa Sourcing Management Cocoa Terminal Markets IC crisis ~35% of OI Deficit years More fund money (deficits) Funds Economic coming in crisis Page 8 October, 2014 Investors days 2014
Slide 9: Major items to manage while sourcing beans
Cocoa Sourcing Management Major items to manage while sourcing beans Bean equivalent (BE) Differentials (ratios) Structure Arbitrage October, 2014 Investors days 2014 9
Slide 10: Hedging
Cocoa Sourcing Management Hedging What is hedging ? Hedging allows you to lock in a certain price level and protects you against adverse price movements Hedging is based on the principle that physical markets and futures markets tend to move up and down together Hedging is a form of insurance agains
Slide 11: Hedging
Cocoa Sourcing Management Hedging How can we buy at £2,000 and sell at £1,400 and not lose money ? Physical / Futures 1) Buy beans @ £2,000 +£2,000 2) Hedge beans @ £2,000 -£2,000 3) Sell beans @ £1,400 -£1,400 4) Sell hedge @ £1,400 +£1,400 -£600 +£600 Overall: no profit/loss Page 11 October, 2014
Slide 12: Major items to manage while sourcing beans
Cocoa Sourcing Management Major items to manage while sourcing beans Bean equivalent (BE) Differentials (ratios) Structure Arbitrage Page 12 October, 2014 Investors days 2014
Slide 13: Differentials
Differentials (cannot be hedged) Differentials are reflecting the premium/discount of a certain cocoa bean to the terminal market (standard bean) BC buys/sells differential contracts on a forward basis without fixing the absolute price The differential book is an integral part of our P&L Differentia
Slide 14: Major items to manage while sourcing beans
Cocoa Sourcing Management Major items to manage while sourcing beans Bean equivalent (BE) Differentials (ratios) Structure Arbitrage Page 14 October, 2014 Investors days 2014
Slide 15: Market Structure
Cocoa Sourcing Management Market Structure Traditionally and by nature of our business, BC carries stocks in beans and semi-finished products All these stocks are hedged, i.e. we are short futures / options Stocks are used for future production At expiry the future shorts normally need to be rolled
Slide 16: Market Structure (Contango)
Cocoa Sourcing Management Market Structure (Contango) 1'850 1'822 1'793 1'800 1'772 1'750 1'700 JUL1 SEP1 DEC1 Short B +£1’772 S -£1’793 B +£1’793 S -£1’822 +£21 +£29 CONTANGO -£8 -£8 -£8 -£8 -£8 COST OF CARRY +£5 +£5 Page 16 October, 2014 Investors days 2014
Slide 17: Major items to manage while sourcing beans
Cocoa Sourcing Management Major items to manage while sourcing beans Bean equivalent (BE) Differentials (ratios) Structure Arbitrage Page 17 October, 2014 Investors days 2014
Slide 18: Arbitrage
Arbitrage Difference between the LIFFE – ICE market Three components define the arbitrage in cocoa Market level on ICE (USD) Market level on LIFFE (GBP) Level of the cable (USDGBP) £60 Main drivers behind the arbitrage Quality of beans (IC vs Indo) £20 Regulations (FSA vs CFTC) Stock levels/supply i
Slide 19: Exposures unrelated to ingredient sourcing
Exposures unrelated to ingredient sourcing As result of the cocoa pressing activities, the volumes of cocoa butter and powder need to be managed in parallel Page 19 October, 2014 Investors days 2014
Slide 20: Processing Management
Cocoa Processing Management Proactive management of combined cocoa ratio Example Booking simultaneously on Feb 21, 2013 would give a combined ratio of 3.60 (attractive vs breakeven ratio) Theoretical But in reality (example) butter booking goes first on Feb 1,90 Powder Powder & Butter Ratio 3,00 21,
Slide 21: VaR
Commodity Risk Management BC uses the value-at-risk concept to assess potential exposures, if any Reference for assessing Group commodity risks VaR Normal market conditions 95% confidence level 10 days time horizon 2000 days history Value-at-Risk (VaR) gives an answer to the question: How much can t
Slide 22: Commodity Risk Organization and Responsibilities
Commodity Risk Management Commodity Risk Organization and Responsibilities Approve GCRM Policy Board of Directors 6 meetings per year Approve Group VaR limit adjustments AFRQCC 6 meetings per year Assess risks and make proposals to BoD Jakob Baer, Andreas Schmid, Approve GCRC requests Timothy E. Min
Slide 23: Some additional information from the CFO
Investors days 2014 Some additional information from the CFO Understanding commodity risk management at BC Working capital, capex, financing Wrap-up Page 23 October, 2014 Investors days 2014
Slide 24: Bean inventory: Seasonal development driven by harvest
Bean inventory Seasonal development driven by harvest Prior Year Actual In MT Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Investors days 2014 Page 24 October, 2014
Slide 25: Cocoa bean prices increased significantly
Bean sourcing Cocoa bean prices increased significantly Page 25 October, 2014 Investors days 2014
Slide 26: Working Capital
Working Capital BC has a good track record in managing the working capital (volumes ). Mitigation of raw material effects however is limited 1'500 +5.2% 1'378 Sales 1'269 Volume 1'214 1'210 In kMT 1'166 +1.0% 1'040 1'039 1'095 1'010 965 932 NWC in mCHF 07/08* 08/09* 09/10 10/11 11/12 12/13** * Incl
Slide 27: Capex investments support the growth of our business
Capex investments support the growth of our business in CHFm +5.2% +4.4% +4.5% CAPEX as % of sales revenue +3.0% +3.3% +2.8% Average = 4.0% 250 218 224 174 144 145 Additional growth IT Upgrade / efficiency gains existing sites Maintenance 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 Page 27 Octob
Slide 28: Available Financing
Available Financing 1 bn CHF room for additional financing available to be prepared for raw material price fluctuations CHF >700 mln Short term Various Uncommited Facilities EUR 400 mln >1 bn Short-term Domestic Comm. Paper Programme 3-5 years Various bilateral LT loans EUR 175 mln Maturity 2016 Ter
Slide 29: Available Financing: Good maturity profile
Available Financing Good maturity profile Uncommitted Committed Funding As per end of year Other L/T Bank Debt Liquidity Buffer Revolving Credit Facility Term Loan 8 S/T Bank Debt (O/S) >600 Liquidity RCF 27 CP 419 355 USD Bonds 297 211 EUR Bonds <100 13 Cash & S/T Dep. (in CHF mln) Aug 14 2014 2015
Slide 30: Some additional information from the CFO
Investors days 2014 Some additional information from the CFO Understanding commodity risk management at BC Working capital, capex, financing Wrap-up Page 30 October, 2014 Investors days 2014
Slide 31: Wrap-up
Wrap-up BC uniquely positioned to benefit from opportunities in the industry and to further grasp market growth Chocolate and cocoa powder, as resilient long-term growth categories Significant opportunities in both emerging and developed markets Gourmet business as a key growth driver Chocolate mark