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Friday, May 16, 2008
Cadbury forecasts higher sales, profit margins

By JANE WARDELL 05.15.08, 12:53 PM ET

Cadbury PLC, the world's biggest candy maker, gave investors a pleasant surprise Thursday by forecasting target-beating sales in the first half and improving profit margins on the back of price increases and lower costs.
Cadbury shares jumped nearly 4 percent after the trading statement from the maker of Dairy Milk chocolate, Trident gum and Halls cough drops, which followed the company's first board meeting since it spun off its U.S. beverage business.
"Following the demerger, I am very pleased to confirm that the new company is off to a strong start with revenues in the first half expected to be above the top end of our goal range and trading margins around 150 basis points ahead," Chairman John Sunderland said.
"This performance reflects the combination of increased marketing investment, higher pricing and successful early execution of our cost reduction initiatives," Sunderland said.
Its shares rose 3.9 percent to 672 pence ($13.08) in trading in London.
Cadbury has announced plans to close 15 percent of its confectionary factories by 2011, cutting around 7,500 jobs, and shift its headquarters to London's outskirts to cut costs amid rising input charges thanks to surging dairy and cocoa prices.
The company has come under pressure due to the $23 billion takeover by Mars Inc. of Wm. Wrigley Jr. Co. announced earlier this month.
That deal - bringing together brands including Snickers, M&Ms, Juicy Fruit, Orbit, Extra and Big Red - will create a company that will leapfrog Cadbury to be the world's largest confectionary business.
Cadbury currently has 10.1 percent of the market. The combined Mars-Wrigley would have 14.1 percent.
In light of the Mars-Wrigley deal, analysts have speculated that Cadbury will seek a deal with The Hershey Co. A matchup between the pair would be mutually beneficial - Cadbury lacks Hershey's U.S. presence, while Hershey lacks Cadbury's global reach.
That would push Cadbury back into the No. 1 spot, as the combined company would hold a 15.6 percent share of the global candy market.
If that fails, analysts said Cadbury could be a takeover target itself with Kraft Foods Inc. named as a likely suitor.
Investec analyst Martin Deboo said the unplanned trading update is "both significant and positive for the shares."
"We expect to upgrade our 2008 forecasts on this news," he said, noting that the 150 basis point margin increase in the first half suggests Cadbury is "likely to meet at least" consensus expectations of 100-plus basis point margin growth over the full year.
Cadbury also announced a series of senior appointments on Thursday.
Guy Elliott, currently chairman of the company's audit committee, will become senior independent director when Roger Carr takes over from Sunderland as chairman in July.
Bob Stack, executive director and chief human resources officer, will retire at the end of the year, the company said. The board has started a search for two new non-executive directors, one of whom will be appointed chairman of the audit committee, it added.
The other half of Cadbury Schweppes, the North American beverage business now called Dr Pepper Snapple Group Inc., began trading last week on the New York Stock Exchange.

by: Woodstock Candy


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