Shares in AarhusKarlshamn plunged by more than 10% after the vegetable oils company warned that growing competition had dented its prospects for exploiting an economy drive by chocolate makers.

The Swedish group said that, while weaker economic growth was incentivising chocolate manufacturers to look to the alternatives to cocoa butter that AAK produces, other groups were getting in on the market.

The sector had witnessed "significant investments in additional manufacturing capacity".

"Uncertainty remains regarding the impact of the excess capacity," AAK said.

"Short-term volume growth will not compensate for the reduction in margins arising from excess capacity."

Regional setback 

The company blamed the capacity increase for a decline of 19.9% in the contribution to profits of its chocolate and confectionery fats division in the first three months of the year.

The business had also suffered from a weak revival in its important Eastern European chocolate market.

"Later in the quarter, it became obvious that chocolate consumption in Eastern Europe is recovering more slowly than in the rest of the world," AAK said.

Nonetheless, helped by a jump in profits at its food ingredients division, the group reported a 75% jump in earnings to SEK114m.

AAK shares closed down 10.4% at SEK 151.00 in Stockholm, their lowest finish for six months.