Barry Callebaut forecast continued strength in cocoa prices, but a weak sugar market, as the chocolate giant reported an acceleration in sales growth, beating analysts' expectations.

The world's biggest chocolate maker, which manufactures for companies such as Hershey and Nestle, said that cocoa prices, which remain within 3% of a 32-year top in London, were "likely to remain high and volatile", after the confectionery market pulled out of recession.

The market "began to recover" in the February-to-April period, the third quarter of Barry Callebaut's fiscal year, growing sales 3.5% by volume, led by a 23% surge in China and 9.8% expansion in Brazil.

However, prices of sugar, for which chocolate makers account for only a small proportion of use, were "expected to remain flat".

'Unfavourable' ratio 

Juergen Steinemann, the chief executive of the Swiss-based group added that, despite the recovery in the chocolate market, the so-called combined cocoa ratio would "stay unfavourable".

The ratio compares the prices of raw cocoa beans with the takings from the refined products - cocoa powder, for which prices are strong, and cocoa butter, for which the market has remained weak, in part thanks to competition from vegetable oil-based alternatives.

Mr Steinemann also flagged a potential headwind from the strength of the Swiss franc, which on Tuesday hit a record high against the euro, reaching SFr1.3164 per E1.

However, a strategy of expansion in the fast-growing developing markets, and an increasing willingness among chocolate companies to outsource production, meant that Barry Callebaut was "confident that we will continue to significantly outperform the global chocolate market and be able to achieve our three-year financial targets", he added.

Barry Callebaut is aiming for average volume growth of 6-8% over the next three years, with operating profits expected to at least match this performance.

'Targeted expansion'

In the February-to-April period, the group accelerated volume growth to 11.3%, year on year, with revenues rising by 15.9%, in Swiss franc terms.

The increases reflected the "targeted expansion to emerging chocolate markets, such as Eastern Europe, China, Mexico and Brazil", Mr Steinemann said.

Nonetheless, sales volumes, if not revenues, slowed in Asia-Pacific, where the group said that recovery was eluding Japanese chocolate groups, while demand for mid-priced products had "not picked up yet".

Group sales for the nine months to the end of April rose by 11.7% in Swiss franc terms to SFr3.93m, ahead of analysts' expectations.

Barry Callebaut shares closed 3.3% higher at SFr671.50.