Zetar

Confectionery and snack food group Zetar (ZTR) has issued a trading update in which it expects full year results to be in line with market expectations.

The AIM-quoted company reported that a 'good performance from our confectionery division has offset a difficult trading period for the snacks division.' Group sales increased by 2.2% to £135m, with its confectionery division declaring a 4% increase in turnover from £83m to £86m. The division's strength was driven by a 'good Christmas' , 'all year round product sales' and a 'satisfactory Easter season.'

At its natural snacks division, which sells a range of fruits, nuts and healthy alternatives to traditional snacks turnover was flat at £49m with Zetar arguing that 'raw material cost inflation has severely inhibited snacks' performance.' There was also a comment on Derwent Lynton, the Derby-based luxury chocolatier acquired this April for £800,000- it was described as helping to 'extend our range of chocolate products.'

Speaking to Growth Company Investor CEO Ian Blackburn enthused that the company was 'supplying more everyday (non-luxury) chocolates' adding that a trend of 'more impulse purchases' was taking place on the part of consumers. Looking forward a number of new product launches including 'affordable luxury chocolates' under the Lir brand and a range of custard coated fruit pieces sold under the Ambrosia name should bolster its prospects.

Following the results analysts at Shore Capital held their forecasts. The broker is forecasting pre-tax profits of £6.6m and EPS of 36.8p for the year to April 2011

With the political volatility in the Ivory Coast having calmed somewhat of late, the short-term future of cocoa prices should be under less pressure. The company is increasingly focusing on the chocolate part of its business as consumer tastes change and raw material costs rise. With scope for further growth we retain our long-term buy rating.