January 13, 2015 / 10:57 AM / 5 years ago

Russell Stover buy boosts Swiss chocolate maker Lindt

ZURICH (Reuters) - The takeover of U.S. candymaker Russell Stover will fuel growth for Swiss chocolate maker Lindt & Spruengli after strong demand for premium products boosted sales in 2014, the company said on Tuesday.

A Russell Stover Candies store in Merriam, Kansas July 14, 2014. REUTERS/Dave Kaup

Record-high cocoa prices forced many chocolate makers to raise prices last year, but Lindt has fared better than rivals thanks to its expansion in North America and its focus on the coveted premium segment that companies like Nestle also want to enter.

With underlying full-year sales up 10 percent, far ahead of low single-digit growth in the overall chocolate confectionery market, Lindt also confirmed its operating profit margin target for 2014. Full results are due on March 10.

“I’m confident sales will continue to grow 6 to 8 percent in the future. Russell Stover should also be able to generate similar growth rates, but we first have to fully integrate them,” Chief Executive and Chairman Ernst Tanner told Reuters in a telephone interview on Tuesday.

Lindt paid around $1.3-1.5 billion for Russell Stover last year, Tanner said, securing third place in the United States, the world’s biggest chocolate market.

Including the Russell Stover brand, consolidated from mid-September, the company’s sales rose 17.4 percent to 3.39 billion Swiss francs ($3.34 billion), ahead of market estimates.

Excluding the acquired activities, Lindt’s operating margin should rise by 20 to 40 basis points in 2014, in line with the company’s mid-term targets.

The maker of Lindor chocolate balls and gold foil-wrapped Easter bunnies said it made “impressive progress” in France and Germany last year and reported double-digit sales growth in the United Kingdom, taking sales growth in Europe to 6.5 percent. Stand-alone sales in North America were up 14.3 percent.

Tanner said he expected cocoa bean prices to ease further as a good outlook for crops and only a moderate increase in demand did not justify higher prices. Cocoa prices hit record highs last autumn, but have tumbled since.

Lindt shares, which already gained 23 percent last year and trade at a premium to peers, rose 5 percent by 1045 GMT.

“All elements for our Buy case on the green light,” Vontobel analyst Jean-Philippe Bertschy said.

However, Kepler Cheuvreux’s Jon Cox kept his “reduce” rating on valuation concerns.

(This story has been corrected to change to excluding from including in paragraph 7)

Editing by Richard Pullin and Keith Weir

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