Cocoa prices will remain underpinned by the shortfall in global supplies, Barry Callebaut has said, as it forecast a revival in the global chocolate market from a decline which topped 10% in Russia.

The world's biggest chocolate maker, which manufactures for giants including Hershey and Nestle, said technical reasons were behind the correction which depressed New York cocoa by more than 20% between December, when it hit a 29-year high, and a mid-March low.

Besides the stronger dollar, prices have been weakened by a fund sell-off which many analysts attribute to jitters instilled by the sugar market collapse, rather than cocoa's own fundamentals.

"There still looks to be a deficit, less supply than demand, which looks like driving prices up again rather than them going downwards," a company spokesman said.

Soft butter 

The comments came as the group reported a 4.5% slide to SFr208.0m in operating profits for the September-to-February period, a fall in part down to a knock-on effect of the "aggressive" run up in cocoa prices last year.

While Barry Callebaut's commodities division, global sourcing and cocoa, was able to raise cocoa powder prices, the market for cocoa butter - used in white and milk chocolate – remained "under pressure".

The combined cocoa ratio - a measure of the sale prices of both cocoa butter and powder compared with the price of unprocessed beans – "has further deteriorated".

However, the company forecast that the ratio would improve for the rest of its financial year, leaving the group on track to raise sales volumes by 6-8% between 2009-10 and 2011-12, with operating profits rising at least as much.

"We we are confident that we will be able to achieve our average three-year financial targets and continue to significantly outperform the global chocolate market," Juergen Steinemann, the Barry Callebaut chief executive, said.

'More than pleased' 

In the latest half, the group's sales volumes rose by 7.8% to nearly 660,000 tonnes, led by a rise of nearly one quarter in Asian markets.

Volumes in Americas rose by 13.1% and in Europe by 4.6%, although thanks to soft prices growth in group revenue terms was pinned back to 4.5%, reaching SFr2.66bn.

Mr Steinemann said that he was "more than pleased" with the growth in volumes, given that the global chocolate market overall shrank by 1.4% during the period.

"I am particularly satisfied that the emerging markets in which we invested heavily in past years have developed well," he added.

Barry Callebaut shares closed 1.6% lower at SFr670.00.

Cocoa for May delivery was 0.3% higher at $2,978 a tonne in New York, and up 0.1% at £2,257 in London.