Lotus Bakeries Earnings Call: Growth, Margins, Expansion

Lotus Bakeries NV ((BE:LOTB)) has held its Q4 earnings call. Read on for the main highlights of the call.

Lotus Bakeries NV’s latest earnings call struck a decidedly upbeat tone, with management emphasizing broad-based strength across the business. Double-digit organic growth, margin expansion, strong cash generation and rapid deleveraging framed a year in which strategic investments in capacity, innovation and global brand building appear to be paying off. While management acknowledged some headwinds from foreign exchange, start-up costs in Thailand and the technical impact of an ice-cream carve-out, these were presented as manageable near-term issues against a backdrop of robust demand and disciplined execution.

Double-Digit Top-Line Growth Underlines Strong Demand

Lotus Bakeries reported FY2025 sales of EUR 1.35 billion, up 10% year-on-year, with underlying trends even stronger once currency effects and technical adjustments are stripped out. At constant currencies, like-for-like volume growth reached roughly 10.4%, equivalent to around EUR 130 million of additional revenue, while reported volume growth came in at 9.5% (more than EUR 115 million). Management highlighted that growth is demand-led rather than price-driven, suggesting that the company is gaining real consumption share in key markets and categories rather than simply passing through inflation.

Profitability Strengthens as EBITDA Margin Tops 20%

Profitability improved again in 2025, with underlying EBITDA margin exceeding 20% and reported at about 20.2%. Underlying EBITDA rose 12%, outpacing the 10% top-line growth and indicating healthy operating leverage. Underlying EBIT and EBITDA both grew faster than sales, signalling that cost discipline, scale benefits and mix improvements are offsetting inflationary pressures and the initial overhead burden from new capacity. Management positioned this as evidence that Lotus can invest heavily in growth while still expanding margins.

Net Profit and EPS Extend Multi-Year Growth Trend

Net profit advanced 13% for the year, with the underlying net result reaching EUR 177 million, or 13.1% of revenue. The company underscored a strong track record of value creation, pointing to an underlying EPS compound annual growth rate of 17.1% over the past five years. This sustained earnings momentum, driven by both volume expansion and margin gains, reinforces Lotus Bakeries’ reputation as a structural growth story rather than a short-term beneficiary of pandemic-era snacking trends.

Cash Generation Fuels Rapid Deleveraging

Lotus Bakeries delivered robust cash flow, with free cash flow before expansion CapEx rising 20% in 2025. Cash conversion in the second half, before expansion CapEx, was well above 90%, underlining the quality of earnings. This cash generation allowed the group to reduce net financial debt to EUR 89 million, including EUR 21 million of IFRS 16 lease liabilities, equivalent to just 0.25x underlying EBITDA—a historically low leverage multiple. Management highlighted this balance sheet strength as a strategic asset, giving the company flexibility to keep investing aggressively while maintaining a conservative financial profile.

Heavy Investment and Rising Dividend Reflect Confident Capital Allocation

Capital allocation remained firmly growth-focused. Lotus Bakeries invested EUR 120 million in CapEx in 2025, with the bulk of the spending directed to its new plant in Thailand. Since 2021, the company has deployed more than EUR 500 million, of which over EUR 430 million was expansion CapEx, positioning it for continued volume growth and geographic diversification. At the same time, shareholders are benefiting from a rising cash return: the board proposed a dividend of EUR 90 per share, up from EUR 76 (about +18%), marking 25 consecutive years of dividend growth and reinforcing the company’s “dividend aristocrat” credentials.

Biscoff Continues Global Charge with Brand and Market Wins

The Biscoff pillar remained the core growth engine, expanding 13% in 2025 and maintaining a 10-year average growth rate of around 15%. In the United States, Biscoff has now reached household penetration of 9% with distribution in roughly 80% of stores, and is counted among the fastest-growing global cookie brands. The company continued to invest in brand equity via a new jar design and cookie engraving rollout, boosting shelf visibility and distinctiveness. Internationally, the nationwide launch in India stood out: Biscoff reached more than 300,000 stores within four weeks and generated around 150 million social media views. Strategic partnerships, including the licensing deal with Froneri for Biscoff ice cream (with major launches planned for 2026) and collaboration with Mondelez, support further global exposure and category expansion.

Natural Foods Pillar Outpaces the Group

Lotus Natural Foods delivered the fastest growth among the company’s segments, rising 17% in 2025 and reaching approximately EUR 300 million in sales, with a 10-year average growth rate also around 17%. Brands such as BEAR and TREK benefited from new product innovations and expanded consumer occasions. Examples include BEAR “fruit splits” and TREK Protein Flapjack with Biscoff, illustrating how the group is leveraging its flagship brand across categories. Seasonal and event-linked partnerships further enhanced visibility and volume, supporting the narrative that Natural Foods is evolving into a second major growth pillar alongside Biscoff.

Capacity Expansion in Thailand and the U.S. Starts to Pay Off

The company reported important milestones on its capacity expansion projects. In Thailand, the new greenfield plant in Chonburi produced its first cookies by the end of 2025, and management expects the site—including spreads and in-house bottling—to be fully operational by the end of the first half of 2026. This facility is designed to support demand in Asia, Australia and New Zealand, reducing logistics costs and improving service levels in those regions. In the U.S., new spread production and bottling capacity was commissioned in mid-2025 at the Mebane facility, enabling local sourcing, lower duties and faster delivery to customers. These moves are central to Lotus’s strategy of localizing production in key growth regions.

FX Headwinds Temper Reported Growth

While underlying demand remained strong, management acknowledged that currency movements weighed on reported figures in 2025, particularly in the second half. The weaker U.S. dollar and British pound against the euro reduced reported sales growth versus constant-currency performance. Looking ahead, the company indicated it is facing a starting FX headwind of about -2.5% for 2026 at current rates. Investors were reminded to focus on constant-currency and volume metrics to gauge the true health of the business, though FX remains an external drag on reported numbers.

Technical Impact from Ice-Cream Carve-Out Clouds Comparisons

Reported sales were also affected by the reclassification of Biscoff ice-cream revenue following the move to a licensing arrangement with Froneri. In the second half of 2025, EUR 11.6 million of Biscoff ice-cream revenue was excluded from the reported top line, which tempered headline growth and makes year-on-year comparisons more complex—especially in markets where ice cream is a material component of the category mix, such as the U.K. Management framed the licensing model as strategically attractive for scaling the ice-cream opportunity without heavy capital outlay, but acknowledged that the accounting impact can obscure the underlying volume and brand momentum.

Thailand Start-Up Costs and Higher Depreciation Weigh on Near-Term Margins

The company absorbed non-underlying start-up cash costs of EUR 4.8 million in 2025 related to the Thailand plant, and warned that depreciation from the new facility will add around 0.5% of sales to annualized depreciation in 2026. Additionally, as is typical with new factories, the plant will carry full overheads before it is fully loaded, which may temporarily pressure margins. Management argued that these headwinds are the natural cost of building a larger, more geographically balanced production network, and signalled confidence that margin benefits will materialize as volumes ramp and the asset base is better utilized.

Soft Reported U.K. Growth Masks Underlying Dynamics

Reported growth in the U.K. was limited to 2% in 2025, which stands in stark contrast to the double-digit performance at group level. Management attributed this primarily to two technical factors: the weaker British pound, which reduced euro-reported sales, and the exclusion of Biscoff ice-cream revenue following the Froneri licensing transition. These elements combined to make U.K. top-line growth look soft, although the company suggested that underlying brand health remains solid, with Biscoff and Natural Foods continuing to resonate in the market.

Limited Transparency on The Good Crisp Exit

Lotus Bakeries disclosed a successful exit from its participation in The Good Crisp Company, held through the FF2032 vehicle, but did not provide details on the transaction proceeds. While the sale underscores active portfolio management and a focus on core categories, management’s refusal to quantify the financial impact leaves investors with a gap in understanding the contribution to cash and potential gains. This was one of the few points in the call where transparency was limited, and may prompt questions from shareholders focused on capital allocation returns.

Short-Term Margin Uncertainty Around New Capacity Ramp-Up

Beyond Thailand, management acknowledged that new factories and additional production lines typically run below optimal efficiency in the early stages, with full overheads weighing on profitability. The short-term margin contribution of these assets will depend on how quickly volumes ramp and on product mix. While management remains confident that the medium-term effect will be positive—through lower unit costs, better service levels and regional diversification—it cautioned that quarterly margins may be somewhat volatile as plants transition from start-up to steady-state operations.

Guidance: Demand-Led Growth, Heavy CapEx, Stable Margins

Looking ahead, Lotus Bakeries guided to a continuation of its demand-led growth trajectory, underpinned by recently added and planned capacity. Capital expenditure for 2026–27 is guided at about EUR 250 million, up from EUR 120 million in 2025 and following roughly EUR 240 million over 2024–25, with most of the spending targeted at the Biscoff franchise and additional investments earmarked for Natural Foods manufacturing in South Africa (Wolseley). The Thailand plant is expected to be fully operational by the end of the first half of 2026, supporting Asia-Pacific growth, although its annualized depreciation will add around 0.5% of sales. Despite FX headwinds of around -2.5% at the start of 2026 and integration overheads from new capacity, management expects profitability to remain broadly in line with 2025, with underlying EBITDA margins around 20.2%. Balance sheet strength and cash generation remain central to the outlook, with net financial debt at just 0.25x underlying EBITDA, free cash flow before expansion CapEx up 20% in 2025, and cash conversion above 90% in the second half. The company reiterated its shareholder-friendly stance, maintaining a dividend payout slightly above 40% and proposing a EUR 90 per share dividend.

In sum, the earnings call painted Lotus Bakeries as a structurally growing, cash-generative business doubling down on global expansion, especially for Biscoff and Natural Foods, while preserving a conservative balance sheet and a rising dividend. Short-term noise from currencies, start-up costs, depreciation and technical reporting changes slightly obscures the numbers, but the underlying story remains one of strong volume-driven growth and disciplined investment. For investors, the key takeaways were continued top-line momentum, resilient margins despite heavy CapEx, and a clear commitment to both reinvestment and shareholder returns.