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Interim 2007/2008 Barry Callebaut AG Earnings Conference Call - Final.

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Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning and good afternoon ladies and gentlemen. Welcome to the conference call regarding the half year results of the fiscal year 2007/2008 of Barry Callebaut. At this time you will be joined into the conference room with Mr. Patrick De Maeseneire, CEO, accompanied by Mr. Victor Balli, CFO of Barry Callebaut. Thank you.

PATRICK DE MAESENEIRE, CEO, BARRY CALLEBAUT AG: Good morning ladies and gentlemen here in the room, on the phone or on the webcast. Welcome to our joint analyst and media conference on Barry Callebaut's half year results for fiscal year '07/'08 period which ended on February 29, 2008.

Thank you very much for joining us here, my name is Patrick De Maeseneire, I'm the CEO of our company, I'm here together with our CFO Victor Balli. A remark for those who are not in the room, the slides we are going to use can be downloaded from our website.

Slide two reminds you that the information given during this conference contains some forward-looking statements which reflect the best of our current knowledge, actuals may vary. Furthermore, please be informed that this conference is being recorded.

Let me start with a summary of the financial highlights on slide four. The first semester of our fiscal was an investment intensive period. In view of this investment and high raw material and energy prices our financial results for the period are in line with our own expectations. Growing 3 times as fast as the global chocolate market our sales volumes increased by 10.3% to 612,436 tons. First deliveries to major outsourcing customers and good demand from smaller customers led to the above market volume growth.

Sales revenue rose significantly by 21.1% to CHF2,585 million. It was largely driven by higher cocoa bean and other raw material prices and favorable exchange rate developments. Excluding cocoa price and exchange rate effects, sales revenue rose by 15.7%.

For us profitability was expected to be impacted by the following three factors. Sales prices for branded consumer goods could not be increased until January 1, 2008 which resulted in a delay in price adjustments relative to higher raw material costs especially from the milk side. The startup of the new factories in Russia and China led to non-recurring additional costs. And as previously communicated large outsourcing contracts are initially associated with high fixed costs and low capacity utilization leading to a lower EBIT per ton. Large outsourcing volumes also come in at a lower margin as said many times last year.

Despite these one-off effects operating profit increased by 1.3% to CHF200.4 million compared to the reported EBIT figure however for the first half of fiscal '06/'07 of CHF190 million, operating profit was up 5.5%. Net profit for the period was stable at CHF124.4 million adversely affected by a loss on the sale of a minority participation and a higher tax rate.

Let's have a look at the main events during the first six months of the current fiscal year on slide five. The period under review was marked by significant investments into our future, we opened two new chocolate factories, one in Russia, one in China which will allow us to capture growth opportunities in these emerging markets. We also integrated four new production sites in North America and Europe and phased in three major outsourcing contracts.

We significantly expanded our cocoa processing capacity by acquiring a factory in Eddystone, Pennsylvania late last year and buying a 60% stake in KLK Cocoa in Kuala Lumpur, Malaysia this week. We are also in the process of doubling our capacity in San Pedro, Ivory Coast. Furthermore we divested our consumer product subsidiary in the Ivory Coast and our biscuit in Wurzener, Germany to focus on our core chocolate business.

The first semester of fiscal '07/'08 also had its challenges. On slide six you can see that our cost environment continued to be difficult giving the exceptionally high and volatile raw material prices. On the other chart you can see that cocoa prices increased by almost 50% between September 2007 and February 20078 This price increase was followed by a sharp...

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