Lotus Bakeries’ profit rises 12.6% on strong Biscoff, Natural Foods sales

Lotus Bakeries reported robust first-half performance, with underlying operating profit rising 12.6% to €109.7 million, outpacing 9.7% revenue growth to €657.3 million, driven by double-digit volume gains in its Biscoff and Natural Foods segments. The company is nearing Biscoff original cookie production capacity limits by 2025 and plans significant capital expenditures of at least €250 million for 2025-2026 to expand global capacity, including a new Thailand plant commencing production in H2 2025. This indicates strong demand and proactive investment for future growth, despite potential minor headwinds from a weaker USD in the second half.

Analysis

Lotus Bakeries reported a robust first half, with underlying operating profit growth of 12.6% outpacing revenue growth of 9.7%, indicating strong operational leverage and expanding margins. This performance was driven by significant double-digit volume gains in its two core growth engines: the Biscoff brand, which saw revenue climb over 11% on a 10% volume increase, and the Natural Foods segment, where sales rose more than 16%. Critically, the strong demand for Biscoff is pushing the company to its production capacity limits, which validates the planned minimum capital expenditure of €250 million for 2025-2026. The greenfield plant in Thailand, now ahead of schedule for a H2 2025 start, is a key catalyst for unlocking future growth. While the company successfully passed on some costs, with price increases contributing 1.5 percentage points to revenue, it faces headwinds from higher cocoa prices and a potential 1.5% sales drag from a weaker U.S. dollar in the second half. Despite these factors and planned investments, the balance sheet remains solid with net financial debt at a low 0.6 times EBITDA.

Key Decisions for Investors

• Investors should recognize the strong underlying momentum, as profit growth outpacing revenue signals enhanced profitability and operational efficiency driven by powerful brand performance.
• The significant capital expenditure plan of at least €250 million, directly addressing production capacity constraints, reflects management's high confidence in sustained long-term demand and should be viewed as a key enabler for future growth.
• It is prudent to monitor potential margin pressure from commodity inflation, specifically higher cocoa prices, and the disclosed foreign exchange risk from a weaker U.S. dollar, which could temper H2 performance.
• The successful brand extension strategy through licensing partnerships with Mondelēz and Froneri de-risks entry into new product categories and provides an additional, capital-light avenue for growth.