Barry Callebaut volumes recover, analysts question cocoa price assumptions

By Paolo Laudani and Kira Britten

July 9 (Reuters) - Swiss chocolate maker Barry Callebaut said on Thursday its third-quarter sales volumes rose for the first time in two years and forecast a smaller full-year volume decline than earlier expected, helped by stabilising operations in North America.

Sales volumes rose 5.7% from a year earlier and the group said it now expected volumes to fall 1% in the year ending in August, compared with a 2.5% decline forecast in a company-provided consensus.

Analysts questioned, Barry Callebaut's assumption of cocoa prices around £3,000 ($4,023.60) per ton, well below current market levels above £4,400.

Between March and May, during the company's third quarter, cocoa prices averaged £2,711, but exceeded £3,400 over the first nine months of Barry's reporting year.

The company said recent price moves reflected speculative activity linked to El Niño concerns and seasonal volatility during the low point of the crop cycle.

The sales volumes of Barry, which supplies brands such as Mondelez, Nestle and Hershey, are closely watched as an indicator of global chocolate demand following a period of record cocoa prices.

"Good to see a volume recovery after two years of decline with a beat driven by its lower-margin cocoa business," Kepler Cheuvreux analyst Jon Cox said.

"However, as cocoa prices rise there are growing risks for the company’s balance sheet and also for the chocolate market volume recovery," he added.

Morningstar analyst Svetlana Menshikova said a persistent gap between the company's cocoa price assumption and market prices could also pressure next year's outlook.

Shares in Barry Callebaut were down around 0.6% at 1020 GMT. They lost around 10% in the past three months as cocoa futures climbed about 90% amid concerns about West African crops.

Barry Callebaut, one of the world's largest cocoa processors, which supplies chocolate for Magnum ice cream and Nestle's KitKat bars, kept its forecast for recurring core earnings to fall by a mid-teens percentage in local currencies this year.

The company said the volume gain reflected "early signs of stabilising fundamentals and service levels in North America".

($1 = 0.7456 pounds)

(Reporting by Paolo Laudani and Kira Britten in Gdansk; Editing by Matt Scuffham, Christian Schmollinger, Subhranshu Sahu and Tomasz Janowski)