Barry Callebaut (BARN) Faces Debt Crunch After 63% Price Hike and 6.3% Volume Drop - CEO in Talks with Banks

Barry Callebaut (SIX: BARN) is under pressure to bring its debt down, CEO Peter Feld said in a recent interview. He painted a picture of higher costs, shrinking volumes and active talks with banks as the Zurich-based chocolate maker tries to steady the balance sheet.

Feld noted the company hiked list prices by about 63% in the current business year while sales volumes slid roughly 6.3%. Those moves follow a July downgrade of volume guidance - the third cut this year - driven by elevated cocoa costs and uncertainty around U.S. tariffs that left some customers buying less.

On the leverage front, ratings agencies trimmed Barry Callebaut's outlook to negative earlier this year, and Feld didn't sugarcoat it: warehousing cocoa has become expensive and the company needs its leverage to fall to a "reasonable level." He said management is in talks with banks and has already announced concrete steps to tackle the issue.

Part of the fix, Feld said, comes from the firm's ongoing investment programme. Better forecasting from new capacity and systems lets the group estimate product demand and cocoa-bean requirements more accurately, which in turn supports tighter inventory and financing management. He added that the financing of current assets has been adjusted and that the company is "on the right track."

For traders, the headlines matter on several fronts. A debt-heavy profile paired with negative outlooks from Moody's and S&P can translate into higher borrowing costs or tighter covenants if ratings deteriorate further. Inventory carrying costs - cocoa in storage - are an obvious drag on cash flow when commodity prices spike. At the same time, steep price increases and softening volumes are a tricky mix for margin dynamics.

So far Feld is signaling active remediation: talks with banks, announced measures and working capital tweaks backed by a clearer picture of future cocoa needs. Will that be enough to placate the rating agencies and calm credit-market nerves? Time will tell.