great article, I started a position in BC about month ago and after all my research I still learnt new things from reading your article.
BTW I like the way your articles are structured starting with the thesis followed by a description of the company as a whole. It really irritates me when you sometimes read a thesis and there isn't much information on what the company actually does besides what you've read in the thesis.
Thanks for your kind comment. Since my write-up, Barry has executed well in my view. But the cocoa price has re-accelerated hugely since November. This will have two key negative impacts.
First, industry-wide volumes will fall, as consumers will react to further price hikes by switching to lower-cocoa products and non-chocolate categories. Barry's own volumes will likely fall roughly in line with industry. This volume effect will put downward pressure on EBIT, even as Barry's robust pass-through mechanisms may manage to retain a steady EBIT contribution per kg.
Second, the very high cocoa price puts huge strain on Barry's free cash generation and balance sheet for as long as it lasts. This adds to uncertainty and investor discomfort with the name.
So far Barry has largely held the line on earnings forecasts, albeit FY25 will now be more H2 weighted. The stock has de-rated hugely due to the uncertainty and fear of a nasty reset-lower profit warning. Personally I've been adding down here, within my context of a diversified portfolio of volatile all caps.
great article, I started a position in BC about month ago and after all my research I still learnt new things from reading your article.
BTW I like the way your articles are structured starting with the thesis followed by a description of the company as a whole. It really irritates me when you sometimes read a thesis and there isn't much information on what the company actually does besides what you've read in the thesis.
Thanks for the in depth write-up!
Jacobs selling down their stake and putting in Peter Feld does make you wonder how long they will still be owners, no?
Thanks, you’re welcome!
Indeed. I struggle to imagine a trade buyer or LBO for the whole business (at a price Jacobs would like).
Therefore it seems most likely that Jacobs want a high share price in order to keep reducing their stake with placements into the market.
Great article. Thank you. Have you looked at BC since this write-up?
Thanks for your kind comment. Since my write-up, Barry has executed well in my view. But the cocoa price has re-accelerated hugely since November. This will have two key negative impacts.
First, industry-wide volumes will fall, as consumers will react to further price hikes by switching to lower-cocoa products and non-chocolate categories. Barry's own volumes will likely fall roughly in line with industry. This volume effect will put downward pressure on EBIT, even as Barry's robust pass-through mechanisms may manage to retain a steady EBIT contribution per kg.
Second, the very high cocoa price puts huge strain on Barry's free cash generation and balance sheet for as long as it lasts. This adds to uncertainty and investor discomfort with the name.
So far Barry has largely held the line on earnings forecasts, albeit FY25 will now be more H2 weighted. The stock has de-rated hugely due to the uncertainty and fear of a nasty reset-lower profit warning. Personally I've been adding down here, within my context of a diversified portfolio of volatile all caps.