Lindt : Half-year Report - 2023

Half-Year Report

January- June

2023

MAÎTRE CHOCOLATIER SUISSE DEPUIS 1845

H A L F -Y E A R R E P ORT 2 023

L ET TER TO SH A R EHOL DER S - 2

Letter to Shareholders 2023

Double-digit organic sales growth across the Group

+10.1% to CHF 2.09 billion

Operating profit (EBIT) increased to

CHF 255.0 million (EBIT margin 12.2%)

Net income increased to

CHF 204.5 million

Good organic growth and market share gains in all regions

+8.9%	+11.2%	+11.1%
"Europe"	"North America"	"Rest of the World"

Dear Shareholders,

The first half of the financial year 2023 was a very successful one for the Lindt & Sprüngli Group. Sales rose year-on-year by +10.1% (in organic terms) to CHF 2.09 billion; this organic growth rate reflects the exit from Russia. Based on an EBIT of CHF 255.0 million, the EBIT margin rose to +12.2%. This resulted in net income of CHF 204.5 million, which corresponds to an increase of 47.8% compared to the first half of the previous year.

These results show that, thanks to our strong brand po- sitioning, high quality standards and committed employees, we were able to achieve very good results even in a volatile market environment. Raw material and energy costs were volatile in light of the persistently tense global political sit- uation, although the Group was able to partially offset these effects through long-term contracts and efficiency improve- ments. However, we had to pass on some of the cost increases to trade partners through price adjustments. High inflation also dampened consumer sentiment, which resulted in subdued demand, particularly in Europe and the US.

Strong development in own retail

Overall, sales in the global chocolate market continue to develop positively. Due to inflationary effects and the resulting subdued consumer sentiment, volumes stagnated or declined slightly depending on the product group and market. While there is a slight trend toward retailers' cheaper private label in some particularly price-sensitive markets in Europe, we are also seeing consumers continue to savour premium chocolate products. The trend toward premium products is particularly evident around seasonal gift-giving occasions, such as Easter and Christmas, which are important for us.

Purchases in our own retail shops are particularly attractive thanks to the exclusive shopping experience and our high-quality gifts. That is confirmed by the above-average increases in sales generated at our own approximately 500 shops. Tourism is also back on the rise, making our own retail channel a key driver of our global growth. Sales in our shops grew in the double-digit range in all market regions. This was also attributable in part to positive mix effects, as consumers selected high-quality products with correspond-

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Group Sales

1. Half-Year 2023, in CHF million

	1 758	1 535	1 799	1 992	2 086
organic	2019	2020	2021	2022	2023
growth	6.2%	- 8.1%	17.4%	12.3%	10.1%
in %

Operating Profit (EBIT)
1. Half-Year 2023, in CHF million
					255
				185
	126		139
		17
	2019	2020	2021	2022	2023
in % of	7.2%	1.1%	7.7%	9.3%	12.2%
sales

ingly higher added value even more frequently than in the previous year. The travel retail business performed very positively once again due to the global growth in passenger numbers at airports.

Lindor and Gold Bunny continue to grow

In our product mix, the trend toward gift packaging, pra- lines and hollow figures continues, meaning that the Group continues to benefit from their higher added value. While double-digit growth was seen in particular in sales of Lindor, Lindt's Gold Bunny for Easter is also gaining more and more fans around the world.

Sales increase in all three segments

The "Europe" segment achieved a significant organic increase in sales of +8.9% to CHF 1.0 billion in the first half of the year. The German and French markets continued to achieve impressive growth despite price-sensitive consumers and a high like-for-like basis. Italy and the UK, also important established core markets, even achieved double-digit growth. Things were also particularly positive for Lindt&  Sprüng- li Switzerland in terms of its domestic business, the export business with distributors as well as our Global Travel Retail business.

The "North America" segment once again confirmed its strategic focus on this market region, which saw double -digit organic sales growth of +11.2% to CHF 798.1 mil- lion. Our five companies in North America grew, particularly Lindt & Sprüngli USA, which is defending its position as the leading chocolate company in the premium segment

in the world's largest chocolate market. It became clear once again that consumers not only want to personally enjoy premium chocolate products made according to a Swiss recipe but have also rediscovered the pleasure of gift-giving in the form of Lindt Gold Bunnies and Lindor pralines for Christ- mas, Easter, and Valentine's Day. Additionally, inflation - although not negligible in North America either - had a less negative impact on consumer sentiment in these markets than in Europe.

The markets in the "Rest of the World" segment also achieved strong organic growth of +11.1% to CHF 281.7 mil- lion. Particular mention should be made of the companies in Japan and Brazil, which posted double-digit growth rates.

Proactive cost management

The picture for the first half of 2023 is mixed on the cost side. While energy prices and the security of supply had still been a major concern for us at the start of the year, this tense situation has calmed down in the meantime. Subject to price developments in the coming winter, we are currently seeing the situation ease. However, the prices of raw materials and intermediate products, such as sugar and packaging materi- als, remain high.

At the same time, the world market price for cocoa has been rising continuously since the end of 2022 and has reached a long-term high. In fact, this increase is so significant that it outstrips the slight easing seen in some other raw materials. That is mainly due to the fact that Lindt & Sprüng- li's high-quality chocolate recipes contain very large amounts of cocoa and cocoa butter in particular. We are preparing to

LINDT  &  SPRÜ NGLI

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monitor the situation on the commodity markets closely for the rest of the year and will adhere strictly to our ongoing cost management approach.

The Lindt & Sprüngli Group continues to invest in the expansion of its infrastructure. Our most important major project - the expansion of the cocoa mass plant in Olten, our largest worldwide - continues to proceed according to plan; it will be operating from 2024 onward to sustainably supply all European production sites. At the same time, the capacity expansion of our Lindt production site in Stratham (USA) is also progressing well.

Financial results

In the first half of 2023, Lindt&  Sprüngli grew sales organically by +10.1% to CHF 2.09 billion, with this growth rate also reflecting the exit from Russia. Its operating profit (EBIT) increased by 37.7% to CHF 255.0 million (previous year: CHF 185.2 million). This corresponds to an EBIT margin of 12.2% (previous year: 9.3%) for the first half of the year. However, due to further increases in raw material costs and larger investments in marketing activities, we do not expect this trend to continue to the same extent in the second half of 2023.

Following the deduction of interest and tax ex- penses, which remained virtually unchanged, net income increased by +47.8% to CHF 204.5 million (previous year: CHF 138.4 million). Free cash flow amounted to CHF 137.3 million (previous year: CHF 204.0 million) with

1. margin of 6.6% (previous year: 10.2%). The balance-sheet total declined to CHF 7.61 billion as at June 30, 2023, due to seasonal factors (December 31, 2022: CHF 7.95 billion) and the equity ratio increased slightly to 57.2% (December 31, 2022: 55.4%).

"Even in challenging times characterized by inflation and cost pressure, the Lindt & Sprüngli Group is very well positioned and continues to write its success story. Global diversification and the continuous strengthening of the brand are proving to be strategic decisions

with foresight. In particular, the expansion into the largest chocolate market in the world - the USA - is clearly paying off."

Ernst Tanner, Executive Chairman of the Board of Directors

Share buyback program well received

The CHF 1 billion share buyback program launched a year ago has been well received by investors. To date, a total of 348 registered shares and 44,160 participation certificates have been repurchased. The cancellation of these assets within the scope of a capital reduction was already resolved at the Shareholders' Meeting of April 20, 2023; a proposal will be submitted to the Shareholders' Meeting of April 18, 2024, regarding any repurchased on or after January 1, 2023.

"We are making progress on our journey toward becoming a sustainable Group: We have intensified our efforts to responsibly source cocoa and other key raw materials and expanded the Lindt & Sprüngli Farming Program.

We have also stepped up our commitment to respecting human rights and submitted our climate targets for validation."

Adalbert Lechner, CEO Lindt & Sprüngli Group

Progress in the area of sustainability

The Lindt & Sprüngli Group's sustainable and socially responsible corporate governance is reflected not only in its economic success, but also in important advances in the area of sustainability: Lindt & Sprüngli has expanded its responsible sourcing activities even further. Since 2020, Lindt & Sprüng- li has sourced 100% of its cocoa beans on a fully traceable and externally verified basis from its own Lindt & Sprüngli Farming Program. By 2025, we aim to source 100% of our cocoa products, including cocoa butter and powder, through sustainability programs. More than 112,000 farmers in seven cocoa countries now benefit from the investments of the Lindt & Sprüngli Farming Program. The Group is working on expanding these programs further in the current year. In addition, the Group strengthened its efforts to address and prevent child labor in the cocoa bean supply chain by developing and implementing its own Community Child Protection System.

We are working continuously to implement our road- map for the responsible sourcing of our raw materials. Last year, we defined standards for sugar, paper, and vanilla. That brings Lindt & Sprüngli closer to its goal of covering 80% of its raw materials and packaging materials through a sustainable procurement program by 2025.

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The Group is also committed to reducing greenhouse gas emissions in the value chain (Scope 1, 2, and 3) and to setting science-based reduction targets in line with the Paris Agree- ment. Lindt & Sprüngli has submitted its climate targets to the Science Based Targets initiative (SBTi) for validation and expects these to be published in the second half of 2023.

Detailed information on our sustainability strategy can be found in the recently published Sustainability Report 2022 at:

www.lindt-spruengli.com/sustainability

Outlook

In light of the positive business trend in the first half of the year, Lindt & Sprüngli is adjusting the outlook for 2023 as a whole. The Group now expects sales growth in the 7-9% range (previously 6-8%) and a year-on-year increase in the profit margin of 30-50 basis points (previously 20-40). This forecast is based on the assumption that geopolitical tensions will not worsen, and that consumer sentiment will at least remain at the current level. For the coming years, the Group continues to reiterate its medium- to long-term sales growth targets of 6-8% with an improvement in the operating profit margin of 20-40 basis points per annum.

Ernst Tanner	Adalbert Lechner
Executive Chairman of the Board of Directors	CEO Lindt & Sprüngli Group

LINDT  &  SPRÜ NGLI

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