Zetar’s nuts hit by raw material price inflation

14-May-2012 - Last updated on 15-May-2012 at 10:09 GMT

Raw material price hikes in nuts hit natural snacks sales at Zetar

Zetar took a 5% hit in annual group revenue after exiting from low margin core commodity sales, particularly in processed and packed nuts, at the beginning of 2012.

The confectionery and snacks manufacturer said its natural snacks division had quit the low margin sales following unprecedented raw material inflation, causing most of the 18% reduction in sales [in the division]. It highlighted the move in its trading statement for the full year ending April 30.

The firm also incurred costs of £1.5m (€1.9m) over the year. These had come from reorganisation and integration after its acquisition of chocolate firm Derwent Lynton (DL), based in Derbyshire, cost reductions across the group and establishing a base in France.

Following its acquisition of DL last year, Zetar said it had closed its Derby factory in October 2011 as planned and transferred and successfully integrated its business into the group’s recently extended York factory.

Disappointing Easter

Zetar reported overall confectionery sales up 2%, although excluding DL sales, the division recorded a drop of 2% in sales as a result of disappointing Easter performance.

However, the company reported many positives, including £13m of new business confirmed to commence this summer. It reported that it had begun to sell gift biscuits and snack packs for the London 2012 Olympics as well.

In terms of new products, it launched a range of everyday Tango chocolates and an energy bar in the UK in April, for which feedback had so far been encouraging.

Strong growth in branded sales

In addition, sales of branded added-value snacks including products under Branston, Reggae Reggae, Ambrosia, Vimto, Fruit Factory and Humdinger, had grown by 20%. That promised good things for the licensed brand portfolio it was building, Zetar said.

It had successfully set up a base in France and said several of its UK character licences had been extended to include France and Belgium. Central listings gained had been secured with four of the seven top French retailers for a range of Christmas advent calendars and other novelty confectionery products.

The French team were now developing their first Easter range and evaluating the opportunity for everyday confectionery and snack products.

Zetar also slashed net borrowing by £4.1m (€5.13m) to £10.m (€13.5m) across the year.

Good progress

“The group has made good progress in developing its everyday business and growing its branded sales, underpinned by our continued focus on product innovation,” said chief executive Ian Blackburn. “Although Easter sales were disappointing and consumer markets remain challenging, we are optimistic about the opportunities in this financial year following recent significant new everyday wins.

“Furthermore the recent cost reduction programme will result in overhead efficiencies in the year and accordingly we are confident that the group’s financial performance in the current year will be back on plan.”

Full year sales had fallen by 5% from £135m (€168.8m) to £128m (€160m), Zetar said. Detailed results are expected to be released on July 18.