In the financial year 2019, Lindt and Sprüngli achieved very solid sales growth, gained substantial market shares and once again grew faster than the overall chocolate market. Group sales increased by 4.5 percent in Swiss francs to reach CHF 4.51 billion. Organic sales growth amounted to 6.1 percent, which is within the set target range.
All three regions – Europe, North America and Rest of the World – contributed to this excellent result.
The solid growth path of the subsidiaries once again laid the foundation for a very successful operating performance, excluding one-off effects group operating profit (EBIT) rose by six per cent to CHF 675 million.
The EBIT (earnings before interest and taxes) margin also improved again to 15 percent. Net income thus increased by 5.1 percent to CHF 512 million.
Market share gains in Europe
In Europe, Lindt and Sprüngli achieved solid organic growth of 6.2 percent. This result is very positive given the various political disruptions, such as Brexit.
Lindt and Sprüngli once again managed to expand its market shares in all key countries and to grow faster than the market average.
Sales growth was particularly strong in the United Kingdom, Germany and Austria. But sales also rose in the home market of Switzerland, as well as in Spain, Italy and France, while all the Eastern European markets even reported double-digit growth.
In addition, the partners opened a new subsidiary in the Netherlands and is about to open a representative office in Portugal in 2020.
Solid result in North America
The North America region achieved strong organic sales growth of 5.4 percent. All three brands – Lindt, Ghirardelli and Russell Stover – contributed equally to this solid result.
During the past year, a number of important strategic decisions were taken to improve efficiency on the sales, production and logistics side of the three US subsidiaries.
First, merchandising for the three brands Lindt, Ghirardelli and Russell Stover was outsourced to a specialised third-party provider as of January 2020.
This allows the partners greater flexibility in the deployment of resources during its busiest seasons.
Another important decision was taken affecting the Russell Stover production – its oldest manufacturing facility in Montrose, Colorado, will close in 2021, and production will move to sites in Kansas and Texas, which will be expanded.
This measure allows production efficiency to be optimised and capacities to be increased, while at the same time, creating additional jobs at the remaining production sites. The third measure involves the closure of existing warehouses as part of the consolidation of the US logistics network already initiated two years ago.
The cost savings created by these measures will improve the result of the US business in future, while at the same time, providing greater support for the brands in achieving additional sustainable and profitable sales growth.
These steps will enable Lindt and Sprüngli in North America to strengthen its position as number one in the premium segment and number three in the overall US chocolate market with its three brands – Lindt, Ghirardelli and Russell Stover – in the long term.
Continuous growth in Rest of the World
The Rest of the World segment continues to expand and generated sales growth of 7.6 percent. The markets of Japan, China and Brazil performed particularly well, with all three reporting strong double-digit growth.
These countries hold substantial growth potential for Lindt and Sprüngli, as the consumption of premium chocolate is steadily rising in these markets.
Around 500 own shops worldwide
The strategy of Lindt and Sprüngli’s own store network continues to pay off and global retail once again made a notable contribution to the overall group result.
Following numerous new shop openings, Lindt and Sprüngli is now present at around 500 locations worldwide and offers consumers a unique brand experience.
Every year, millions of chocolate lovers visit the company’s own shops. The biggest drivers for the retail business were Japan and Brazil.
Operating performance
The solid growth path of all subsidiaries once again laid the foundation for a strong operating performance. Excluding one-off effects, Group operating profit (EBIT) rose by +6 per cent to CHF 674.6 million.
This represents an EBIT margin of 15 percent (previous year: 14.8 percent). Net income increased by 5.1 percent to CHF 511.9 million, providing a return on sales of 11.4 percent.
Operating cash flow rose +27.5 percent to CHF 830.9 million. The balance sheet is debt free on a cash basis, and with an equity ratio of 58.1 percent is very solid.
The one-off effects for the reorganisation of the North America business did not have an impact on the result at net profit level, nor subsequently on earnings per share. This is because the two effects at the level of EBIT and taxes, in the net amount of CHF 59 million each, offset each other.
Outlook
For the coming years, Lindt and Sprüngli confirms its existing mid- to long-term organic sales growth target of 5-7 percent per annum, combined with a steady improvement in the operating margin of 20-40 basis points per annum.
In achieving these targets, Lindt and Sprüngli will continue to grow faster than average in all its markets. Lindt and Sprüngli continues to pursue with the global expansion plans in 2020.
2020 is a very special year for Lindt and Sprüngli: The company is celebrating its 175th anniversary. On this occasion, the Lindt Home of Chocolate is now coming to life at Lindt and Sprüngli’s headquarters in Kilchberg.
The flagship project, funded and realized by the charitable Lindt Chocolate Competence Foundation, will open its doors to the public on May 10, 2020 (Swiss Mother’s Day).
The multifunctional building strengthens Switzerland’s position as a centre of excellence for chocolate manufacturing and continues the pioneer work of the company’s two founders.
An interactive multimedia exhibition, a pilot plant with show production, the largest Lindt Chocolate Shop in the world, a Lindt Chocolate Café and a Chocolateria for chocolate-making courses will be offered to visitors from Switzerland and abroad at Schokoladenplatz 1.
A chocolate fountain measuring over nine metre in height is an impressive feature located right in the entrance area.
In addition to the fountain, which will have real chocolate flowing through it, the tasting room is another highlight, where visitors can sample a wide variety of creations from the Lindt Maîtres Chocolatiers.
One particularly interesting feature is the research facility in the Lindt Home of Chocolate, which will be open to other research institutes as well.
Annual general meeting
Lindt and Sprüngli is grateful for the continuing trust placed in the company by the shareholders.
Thanks to a strong performance in 2019, the company will not only be able to continue the attractive dividend policy, but will also be topping it up with a generous special dividend to celebrate its 175th anniversary.
The Board of Directors is proposing to the 122nd annual general meeting scheduled for April 24, 2020, a +75 percent higher dividend of CHF 1,750 per registered share (CHF 330 from the approved capital contribution reserves (agio) free of withholding tax, and CHF 1,420 from available retained earnings) and CHF 175 per participation certificate (CHF 33 from the approved capital contribution reserves (agio) free of withholding tax, and CHF 142 from available retained earnings).
