Barry Callebaut , which makes chocolate for Nestle and Hershey , expects to outpace the market in the second half of its fiscal year despite unrest in the top cocoa growing Ivory Coast region.

The world's largest chocolate maker topped estimates with a 9 percent rise in first-half net profit to 159 million Swiss francs ($173.4 million), while sales rose 3 percent, or 13 percent in local currencies, to 2.7 billion francs.

Barry Callebaut said it was sticking to its goal to increase sales volume by between 6 and 8 percent on average from 2009/10 through 2012/13 after growing twice as fast as the market in the first half of its fiscal year, which ended on February 28.

Barry Callebaut is confident that its good performance in the past six months will continue in the second half of fiscal year 2010/11 despite the challenging situation in Cote d'Ivoire, the group said in a statement.

The group also said its factory in Japan had not been hit by the crisis there.

At 0918 GMT, Barry Callebaut shares were trading 2.9 percent firmer, outperforming a 0.6 percent gain in the STOXX European food and beverage index <.SX3P>.

We believe the worst is over for Barry Callebaut with cocoa prices now sliding as the political situation in the Ivory Coast moves toward resolution, Kepler Capital Markets analyst Jon Cox said.

The global chocolate market, hit hard during the economic crisis, is slowly returning to growth as consumers indulge again in sweet treats, and Barry Callebaut is benefiting from big confectionery groups outsourcing their chocolate production.

The group has a very strong pipeline for additional outsourcing contracts, Chief Financial Officer Victor Balli told Reuters.

Chief Executive Juergen Steinemann also said in the interview the group would see additional volumes coming through in the second half thanks also to its recent deal with Kraft Foods .

The industry has also had to grapple with high raw material costs and post-election violence in major cocoa grower Ivory Coast, which supplies the world with around one third of its cocoa.

But hopes the political situation in the Ivory Coast could soon be resolved has led to an easing of cocoa prices recently.

Barry Callebaut, which said last month it had stopped exporting cocoa from the Ivory Coast, has stepped up sourcing and production in other countries, such as Brazil, Ghana, Cameroon and Malaysia to avoid supply problems.

We believe we have taken those steps necessary to enable us to honor our customer contracts and meet our commitments during 2011, Steinemann said in a statement.

Steinemann also told Reuters Barry Callebaut's factories in the Ivory Coast were still up and running and that the group would be in a strong position to start moving quickly once the when an export ban is lifted.

VOLATILE

Steinemann said it was very difficult to predict how raw material prices would develop due to volatility, which has in part been fueled by investors seeking to anticipate price movements caused by lumpy supply.

Cocoa prices on ICE rose to a 32-year high of $3,775 a ton in early March boosted by concerns that conflict in Ivory Coast could severely disrupt the flow of cocoa from West Africa.

The market has fallen back sharply, however, in the last few weeks with the decline initially driven by increased risk aversion among investors linked to the Japanese earthquake and tsunami and political turmoil in the Middle East and North Africa.

The fall in prices gathered further momentum this week from perceptions that the flow of cocoa out of Ivory Coast could resume soon as forces loyal to presidential claimant Alassane Ouattara advance toward major Ivorian ports.

The European Union has imposed sanctions against his rival, presidential incumbent Laurent Gbagbo, who has refused to leave power after a disputed election.

(Additional reporting by Nigel Hunt in London; Editing by Hans Peters and Mike Nesbit)

Cameroon Japan Ghana Nestle