“Extreme” cost increases have hit demand for nuts and seeds, but strong growth in chocolate, dried fruit and snacks has helped Zetar notch up double-digit rises in sales and profits this year.
The snacks and confectionery firm, which posted a 40% rise in adjusted pre-tax profit to £6.4m on sales up 11% to £132m in the year to April 30, said: “The impact of extreme cost increases in recent years on nuts and particularly seeds is damping down demand.
"The nuts market grew by only 1% to £132m and the seeds market declined by 1% to £12m.”
However, a renewed focus on economy lines, new launches including Marmite nuts and Reggae Reggae flavoured cashews and peanuts, and increased promotional activity drove “encouraging levels of growth for both nut and fruit snacks”, said chief executive Ian Blackburn.
“We are pleased to report a much-improved financial performance with sales, profits and earnings all growing strongly. Cash generated from operations has doubled, enabling us to reduce year-end net borrowings to just over £11m.”
Zetar’s confectionery division, which has historically focused on seasonal products, children's licensed character chocolate products and retailer own-label products, has also identified new areas of growth with the introduction of luxury boxed chocolates and chocolate- and sugar-coated chocolates, said Blackburn.
However, a “substantial proportion” of the division’s growth this year had come from “everyday products, which by the year-end were contributing almost one-third of the division's chocolate sales”.
Zetar’s Horsley Hick & Flower (HHF) factory near York was further expanded during the year with the addition of a sugar-coating department to complement last year's investment in chocolate and yogurt coating equipment, he said.
“HHF has gained substantial new business during the year. This has resulted in sales more than five times the level of when the business was acquired at the end of 2006.”
While the rapid expansion had created some “operating inefficiencies”, these had been addressed by implementing the confectionery division's computerised production systems and investment in technical infrastructure, he claimed.
Shore Capital analyst Clive Black said the results were “slightly ahead” of expectations. “Zetar has a good position in its market place. The business is a leader in the licensing and batch production market for confectionery and we were most impressed by the Fakenham facility.
“Zetar has shown itself to be proficient in managing the input cost challenges in the nut market in particular, where price rises have been described by the company as extreme.”
He added: “We expect Zetar to grow organically and by acquisition in due course.”
Zetar operates seven factories and employs almost 1,300 staff.