Lindt Shares Fall After Cocoa Prices Weigh on Profitability

By Adria Calatayud

Lindt & Spruengli shares fell after the Swiss chocolatier reported first-half earnings that missed analysts' expectations and turned more cautious on its full-year profitability outlook, reflecting a hit from high cocoa prices.

Chocolate makers have been grappling with increases in raw-material costs after last year's record-breaking surge in cocoa prices, which declined from its peaks over the last few months as consumers cut down spending on chocolate treats. However, cocoa prices remain at historically high levels.

Lindt has sought to pass on rises in cocoa costs through price hikes, but its increases couldn't make up for the higher costs. The company said Tuesday that its first-half operating profit dropped 11% to 259.2 million Swiss francs ($324.8 million), falling short of the 270.9 million francs that analysts polled by Visible Alpha had forecast.

The company said it now expects an increase in its annual operating profit margin at the lower end of the 20 to 40 basis-point range it had previously indicated. For the first half, Lindt's operating profit margin shrunk to 11% from 13.5% in the year-earlier period.

Registered shares in Lindt--those that carry voting rights--traded 6.5% lower in late European morning trading, but the stock remained up 26% since the start of the year.

Lindt Chief Executive Adalbert Lechner said the company showed resilience in a challenging market environment.

Sales grew 9% to 2.35 billion francs, with organic growth of 11%, as price increases offset lower sales volumes. Net profit fell to 188.9 million francs from 218 million a year before.

Lindt raised its full-year sales guidance and now expects organic growth of 9% to 11%, up from its previous forecast of 7% to 9%.

Volume declines don't bode well for Lindt's profitability and, while Europe continues to perform strongly, growth in other markets has taken a hit, Vontobel analyst Jean-Philippe Bertschy wrote in a note to clients.

All regions posted profitability declines on higher raw-material costs, but the company seems to have a good grip on other costs, Bertschy said.

Write to Adria Calatayud at adria.calatayud@wsj.com