Cocoa prices have declined sharply to US$3,200-3,300/tonne as of Apr 26, down more than 60% from the 2024-25 peaks of US$12,500-12,900/tonne. This marks a clear turning point from the elevated cost environment that compressed Delfi (SGX:P34)’s gross margin to 26.5% in 2025 (2024: 27.4%).
Input cost tailwinds to drive earnings recovery from a low base.
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With costs now correcting sharply, we expect a lagged but meaningful recovery in gross margins in 2026-27, supporting improved operating leverage and earnings recovery.
Hedging and forex to moderate recovery pace.
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Recall that a 3.9% rupiah depreciation in 2024 contributed to a 1.1ppt decline in gross margin. Year-to-date, rupiah depreciation is 2.3%. Hence, while the direction of margins is improving, we expect the pace to be gradual rather than immediate.
Shorter cycle enables faster cost pass-through.
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Above is an excerpt from a report by UOB Kay Hian Research. Clients of UOB Kay Hian may be the first to access the full PDF report @ https://www.utrade.com.sg/.
