Chocoladefabriken Lindt & Sprüngli AG
Lindt & Sprüngli AG: SEMI-ANNUAL REPORT
Ad hoc announcement transmitted by DGAP – a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.
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Kilchberg, August 22, 2006
SEMI-ANNUAL REPORT
January – June 2006
– Lindt & Sprüngli accelerates growth and gains further market shares.
– High double-digit increase in sales: in local currencies +14.8%, in CHF
+17.2%.
– Operating profit (EBIT) grows by CHF 9.8 million to CHF 15.5 million.
The 2006 semi-annual report is the first to be based on IFRS accounting
standards. To permit a comparison between the 2006 and 2005 half-yearly
statements, the sales and profits figures, drawn up on the basis of Swiss
GAAP FER in 2005, have been restated accordingly. The differences in IFRS
compared with the former FER standards are minimal and are described in
detail in the 2005 Annual Report.
KEY FIGURES 2006 2005 Change
INCOME STATEMENT January–June January–June
(unaudited) CHF millions CHF millions % / millions
Sales growth in local 14.8 %
currencies
Sales 983.4 839.1 17.2 %
Other income 3.7 3.9
Total income 987.1 843.0 17.1 %
Total Expenses –971.6 –837.3
Operating profit (EBIT) 15.5 5.7 CHF 9.8 mio
Net financial result –1.4 –0.1
Income before taxes 14.1 5.6 CHF 8.5 mio
Taxes –4.2 –1.7
Semi-annual net income 9.9 3.9 CHF 6.0 mio
Employees 6’397 5’945 7.6 %
KEY FIGURES BALANCE SHEET 30.6.2006 31.12.2005
(unaudited) CHF millions % CHF millions %
ASSETS
Property, plant & 625.5 615.4
equipment
Intangible assets & 36.2 37.5
financial assets
Total non-current assets 661.7 39.8 652.9 34.2
Inventories 345.8 314.8
Receivables/other assets 352.8 737.2
Securities & cash 300.8 203.2
Total current assets 999.4 60.2 1’255.2 65.8
Total assets 1’661.1 100.0 1’908.1 100.0
LIABILITIES
Share & participation 22.1 22.0
capital
Treasury stock -4.8 -6.4
Retained earnings and 915.1 955.5
other reserves
Total shareholders’ 932.4 56.1 971.1 50.9
equity
Total non-current 314.9 19.0 312.7 16.4
liabilities
Accounts payable to 136.7 249.0
suppliers/other
Accrued liabilities 249.7 292.7
Bank & other borrowings 27.4 82.6
Total current liablities 413.8 24.9 624.3 32.7
Total liabilities & 1’661.1 100.0 1’908.1 100.0
shareholders’ equity
COMMENT
Chocoladefabriken Lindt & Sprüngli AG further accelerates its growth rate
and confirms yet again the sustained positive developments of recent years.
With a high, double-digit sales increase in Swiss francs of 17.2% to CHF
983.4 million and organic growth in local currencies of +14.8%, Lindt &
Sprüngli has once again grown faster than the overall market and is winning
market share in all its markets and segments.
When analyzing the Group’s earnings in the first half of 2006, it is
important to bear in mind the seasonal and gift-oriented nature of the
premium chocolate business: the Lindt & Sprüngli Group makes around 40% of
its annual sales during the first half of each year, but at the end of June
these sales are charged with around half of the fixed costs of production,
administration and marketing. This means that the profitability of the
Lindt & Sprüngli Group in relation to sales in the first half of the year
cannot be equated with its profitability over the year as a whole. The
excellent growth in sales during the first half of 2006 has seen operating
profit rise by CHF 9.8 million to CHF 15.5 million, while the semi-annual
net income has increased by CHF 6.0 million to CHF 9.9 million.
MARKET
In harmony with an environment of slow economic recovery and the slight
progress in the employment market, consumer sentiment has improved somewhat
in the European countries over the last six months and remains positive in
the overseas markets of importance to Lindt & Sprüngli such as the USA,
Canada and Australia. A similar trend can be identified in retail sales.
Despite further increases in the cost of energy and rising interest rates,
most chocolate markets are seeing their overall value develop slightly over
the equivalent period last year even though volumes continue to stagnate or
may even be continuing to decline. In this slow-growing environment, two
different trends are becoming increasingly important: on the one hand,
there is continuing growth in the premium quality segment with an
increasing preference for dark chocolate with a high cocoa content and, on
the other, an overall positive development of the low-priced private
labels. Thanks to its renowned positioning as the premium brand and decades
of excellence in producing high-quality chocolate products, LINDT has an
outstanding foundation for future development.
SALES
In the first half of 2006, Lindt & Sprüngli achieved sales of CHF 983.4
million. This represents an increase over the same period in 2005 of around
CHF 145 million or +17.2% in Swiss francs and 14.8% in local currencies.
The slightly higher growth in Swiss franc terms can be attributed to the
currency’s weakness against the euro and the dollar currencies. The
increase in sales has primarily been driven by a strong +11.6% increase in
volume together with the combined effects of price increases and product
mix, which contributed 3.2%.
All the Group’s companies contributed to this excellent growth and hence
gained market shares everywhere. One positive repercussion is that it was
possible to increase marketing activities, in particular by investing in
advertising, in all areas. This demonstrates once again that the Group’s
long-pursued strategy of exclusive positioning in the premium chocolate
segment, uncompromising product quality and the continuous flow of
innovations are beginning to bear fruit in the long term. A uniform global
communications strategy and ongoing brand support are other factors in the
Group’s success. In the seasonal sector (Valentine’s Day, Mother’s Day,
Easter), where LINDT products continue to play an increasingly important
role thanks to their suitability as exclusive chocolate gifts and the
prestigious image they convey to consumers, developments remained positive,
while the major all-year-round products LINDOR and
EXCELLENCE continued to consolidate their positions worldwide. In the dark
chocolate segment, a large number of LINDT innovations enlivened what has
become a fast-growing market. Developments in the world’s three largest
chocolate markets – the USA, Germany and the UK – were again extremely
encouraging due to a further expansion of distribution and more rapid
product rotation at outlets. A late Easter and the rather cool spring
weather in many important countries also had a positive effect on chocolate
sales.
PRODUCT SEGMENTS
Continuous renewal of the product range, an in-depth understanding of
customer requirements and accurate anticipation of consumer habits and
trends have also made a major contribution to the Group’s success. In the
chocolate sector, there are two basic types of purchasing decisions:
planned purchases (gifts for others) and impulse purchases (for
self-consumption). LINDT products enjoy very high acceptance in both
categories: firstly, because consumers know they can trust both the value
and quality of LINDT products and ingredients as well as the company’s
in-house expertise; and secondly, because of the high level of new product
introductions.
As usual, festive, highly gift-oriented events such as Valentine’s Day,
Easter and Mother’s Day made a very significant contribution to business in
the Spring season. On Valentine’s Day, the red, heart-shaped LINDOR
specialities once again achieved encouraging growth, in particular in the
English-speaking markets (UK, Australia, USA, Canada). However, Valentine’s
Day is becoming increasingly important in other western European countries
thanks to the new, innovative packaging used for the LINDOR line. The
lateness of Easter this year further boosted Easter business. With its
attractive, extremely festive Easter collection, which is updated every
year and adapted to the traditions and preferences of local markets, LINDT
was able to further extend its position in this important segment and win
additional market share. The GOLD BUNNY continued to enjoy success in both
existing and new markets, not just in Europe but also overseas.
The somewhat static chocolate tablet segment was again given a boost by
LINDT’s new, truly innovative product concepts which respond perfectly to
consumers’ demands. These include the introduction of EXCELLENCE
specialties in the form of very thin chocolate tiles. Samples were sent to
a large number of Swiss households to accompany the launch of this new
product. LINDT’s second and highly successful product line is the filled
tablet segment. Here, LINDT was able to generate great interest in all
markets with its range of new, original tastes. The existing speciality
chocolate bars based on long proven milk recipes continue to be popular and
extremely successful. In addition, innovative product concepts have been
launched in a number of countries, offering consumers a genuinely new,
interesting taste experience. The trend toward dark, high-quality chocolate
is becoming ever stronger in the USA. Consequently, Ghirardelli was able to
achieve great success with the launch of its SQUARES with 60% cocoa content
and a new specialty line with a cocoa content of 72%.
In the pralinés segment, the LINDOR balls have risen to new heights with
the introduction of novel specialities such as a dark chocolate variant
with 60% cocoa and are far and away the most successful and best known
LINDT product worldwide. In Switzerland, Italy and the English-speaking
markets particularly, the popular LINDOR balls have been an outstanding
success story for many years. The rest of the assorted dark chocolate
praliné products have also further established themselves in a number of
countries. More new product concepts and innovations are in preparation
everywhere as the autumn and Christmas season approaches.
COMPANIES
European companies: Lindt & Sprüngli has achieved above-average sales
growth in all its markets and gained new market shares. The growth achieved
by the European Lindt & Sprüngli
subsidiaries in both the seasonal and all-year-round sectors has been
driven by the broad product range, the creativity shown in product
development and the use of innovative marketing concepts. This development
has been further supported by the continuing improvement in consumer
sentiment and the sustained trend toward quality products, particularly
high-value dark chocolate products. As a result, Lindt & Sprüngli’s sales
in Switzerland, Germany, Italy, England and Spain rose between 10% and 20%.
LINDT’s companies in France, Austria and Poland, as well as Caffarel, also
enjoyed encouraging single-digit growth rates substantially above the
market average. In Sweden, the new Lindt & Sprüngli marketing company
founded in 2005 made a very encouraging start.
North American companies: In the USA and Canada, the premium chocolate
segment has been growing faster than the overall chocolate market owing to
the positive economic conditions in these countries and, to a considerable
extent, the efforts made by LINDT and GHIRARDELLI. At more than 20%, the
growth rate achieved by the three North American companies combined are
well ahead of the market average and translate into a substantial gain in
market share. These excellent developments are due to faster product
rotation, the extension of the product range available to existing trade
channels and expanded distribution in the shape of new customers. For
LINDT, the product focus remains firmly on LINDOR and EXCELLENCE, while
Ghirardelli concentrated on its extremely successful SQUARES, which were
complemented by new specialties with a high cocoa content. These positive
developments were given an additional boost by the expansion of the
seasonal range to include high-quality gift items from LINDT and
GHIRARDELLI, thus further enhancing the awareness and image of the two
brands. The proprietary retail business of the two American subsidiaries
continued to advance with a more or less unchanged number of sales outlets.
The recently founded marketing company in Mexico City can also look back to
an encouraging start.
Other markets: In Australia Lindt & Sprüngli has advanced to a leading
position in the total chocolate market and achieved once again high
double-digit sales growth. Excellent progress was also made in duty free
business as well as by export markets in Europe and overseas. In Japan
especially, LINDT’s dark chocolate specialities are enjoying increasing
popularity.
COSTS
Materials costs as a proportion of sales during the first half of 2006 were
unchanged compared with the same period in 2005 at 31.9%. As a result of
increasing worldwide demand for chocolate with a high cocoa content, the
price of high-quality cocoa has increased in recent months. These increased
costs were compensated for by a slight fall in cocoa butter costs and
stable bulk cocoa prices. The costs of milk, sugar and packaging materials
remained largely unchanged. The prospect of a good harvest suggests that
the price of hazelnuts and almonds may fall again after the large increases
of the last three years. If this trend continues, it should be reflected in
reduced costs as of 2007. The average workforce grew by 7.6% to 6,397
employees. This increase relates primarily to the production sector, where
capacity was further improved. This resulted in personnel costs as a
proportion of sales being further reduced by 1.1 percentage points from the
previous year’s figure to reach 24.8%. As a percentage of sales, operating
costs also fell slightly compared with the same period in 2005, to 38.1%.
As in the previous few years marketing investments, which are included
under operating expenses, continued to rise at an above-average rate,
helping to consolidate the LINDT and GHIRARDELI brands and reinforce
product-related communication. In contrast, the increase in the other
operating costs as a proportion of sales was below average and more than
compensated for the increased advertising expenditure.
INCOME
Thanks to excellent sales growth and cost control in all areas, operating
profit (EBIT) rose by CHF 9.8 million over the same period last year to
close at CHF 15.5 million. All three geographical segments contributed to
this increase. After taking account of the higher net financial result and
a slightly reduced tax rate, the half-yearly profit rose by CHF 6.0 million
to CHF 9.9 million.
BALANCE SHEET
Compared with the previous year, the balance sheet total fell by
approximately CHF 250 million as a result of the seasonal reduction of
working capital. In the single positions, this can be seen in a decline in
accounts receivable of CHF 400 million accompanied by a simultaneous
increase in goods in stock and liquidity. Shareholder’s equity at June 30,
2006 was 56.1%, thus reflecting the Group’s continuing financial strength.
The net financial position at the half-year balance date was CHF 174.0
million which corresponds to an increase of CHF 41.7 million over the first
half of 2005.
OUTLOOK
FOR FULL YEAR 2006
Sales: Despite the impact of the hot summer in Europe and the USA, and the
very strong growth achieved in the second half of 2005, Lindt & Sprüngli
expects an increase in sales for the full year 2006 of 10–12%.
Capital Expenditures: To provide the capacity required in the light of the
Group’s high level of growth in terms of both sales and volume, the annual
capital expenditure requirements for 2006 and 2007 will increase to more
than CHF 160 million. Investments will be focused on production lines,
long-term infrastructure for distribution, logistics, and the extension of
production facilities. Currently, it is expected that annual capital
expenditures from 2008 onward will stabilize at lower levels of CHF 100–130
million.
Profit: As in previous years, Lindt & Sprüngli is striving to achieve a
long-term increase in operating profit margin (EBIT) of approximately 20–40
base points compared with the equivalent period in 2005 and is confident
that it can achieve this objective again in 2006.
The Lindt & Sprüngli Group will publish financial information on the
following dates:
– January 23, 2007: Net Sales for 2006
– March 20, 2007: 2006 Year-end Presentation to the Press (morning)
2006 Year-end Presentation to Financial Analysts’ (afternoon)
– April 26, 2007: 109th Annual General Meeting
– Second-half of August 2007: Release of Semi-Annual Report January to
June 2007
Additional information available under
www.lindt.com (Investor Relations – Semi-Annual Report 2006)
(c)DGAP 22.08.2006
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Language: English
Issuer: Chocoladefabriken Lindt & Sprüngli AG
Seestrasse 204
8802 Kilchberg Schweiz
Phone: + 41 44 716 25 37
Fax: + 41 44 716 26 60
E-mail: ekeiser@lindt.com
WWW: www.lindt.com
ISIN: CH0010570759
WKN: 1057075
Indices:
Listed: SWX
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