Barry Callebaut has reported a drop in its full-year net profit; a worse-than-expected reduction. The Swiss-based company, which is also the world's biggest industrial chocolate maker, has thus reduced its sales growth targets to try and maintain profit margins. Additionally, the company will cut its production capacity in Port Klang. Malaysia, with immediate effect, and shut down its cocoa factory in Bangpakong. Thailand, by the end of January 2016-an indication that overcapacity and falling demand in Asia are hurting profits. According to the company's full-year 2014-15 results report." A challenging market environment characterized by a historically low combined cocoa ratio triggered by grinding overcapacity and low demand for cocoa products had a negative impact on profitability". Since early 2014, cocoa grinders globally have faced a dismal combined ratio - the processing margin for both cocoa butter and powder - while cocoa bean prices soared to four- year highs. Therefore, many large chocolate companies have raised their retail prices, affecting consumers and demand in the process. The cocoa demand in Asia has been hit particularly hard, despite it being an emerging market for chocolate. Even Hershey Co., for whom Barry Callebaut provides chocolates, has noted slowed growth in China for the past five quarters. This was because cocoa grinding. which separates the beans into powder and butter, has fallen in Asia. Asian cocoa bean processing has been relocating from Malaysia, whereby global companies, such as Olam International Ltd. And Cargill, opened their cocoa processing facilities in Indonesia in 2014. Meanwhile, some independent and older grinders have reportedly closed in recent years as they were unable to compete.
