Cadbury profit edges up but sales uninspiring

LONDON – Cadbury Schweppes, the world’s largest confectioner, posted just a two per cent rise in half-year profit on yesterday and sales growth was at the bottom of its target range, sending its shares lower.

The maker of Dairy Milk chocolate, Trident sugar-free gum and Dr Pepper drinks stuck to its sales and margin targets, however, despite rising costs and a weak dollar. The UK group reported strong trading in British confectionery and US diet carbonated drinks and said the integration of US-based sweet maker Adams was on track.Chief Executive Todd Stitzer said he was encouraged by trading in the first year of its four-year Fuel for Growth strategy aimed at boosting sales and margins, while new products helped fuel sales growth and it cut costs as planned.”Our core markets and key brands are performing well, and we currently expect the full year to meet our targets on sales, margins and free cash flow,” Stitzer told a conference call.The group, which also makes Snapple beverages, Halls cough sweets and Dentyne gum, reported pretax profit before exceptionals of 371 million pounds (US$688, 4 million; N$4 billion) for the 24 weeks to June 13, just ahead of a consensus forecast of 366 million.The half-year dividend rose four per cent to 3,8 pence a share.The group warned, however, that higher commodity prices along with pension and staff benefits had cost it 50 million pounds (N$550 million) in the half-year and currency effects, largely the weak dollar against the pound, had trimmed 25 million pounds (N$275 million) off profits.Cadbury shares slid two per cent to 464 pence (N$5) by 0840 GMT as analysts noted that underlying sales only just met the firm’s own target and the company cautioned it faced challenging integration projects surrounding Adams in the second half.Underlying sales rose three per cent and operating profit margin rose 30 basis points in the first half.These compare with its goals to raise sales 3-5 per cent a year and increase margins 50-75 basis points under its Fuel for Growth strategy.Cadbury launched this last October to make annual savings of 400 million pounds (N$4 billion) by 2007 from job cuts and plant closures, using a third of these to drive sales growth and the rest to push up profitability.Cadbury is also targeting a free cash flow of 1,5 billion pounds (N$16,5 billion) over 2004-2007.Analyst David Lang at Investec said Cadbury’s confectionery business put in a solid performance and although American carbonated drinks such as Dr Pepper did well its non-carbonated drinks such as Snapple and Mott’s struggled.He is holding his 2004 pre-tax profit forecast at 925 million pounds (N$10 billion) and keeping his “buy” recommendation on the stock, even though the stock has already outperformed the FTSE 100 index by around 27 per cent over the past year.-Nampa-ReutersThe UK group reported strong trading in British confectionery and US diet carbonated drinks and said the integration of US-based sweet maker Adams was on track.Chief Executive Todd Stitzer said he was encouraged by trading in the first year of its four-year Fuel for Growth strategy aimed at boosting sales and margins, while new products helped fuel sales growth and it cut costs as planned.”Our core markets and key brands are performing well, and we currently expect the full year to meet our targets on sales, margins and free cash flow,” Stitzer told a conference call.The group, which also makes Snapple beverages, Halls cough sweets and Dentyne gum, reported pretax profit before exceptionals of 371 million pounds (US$688, 4 million; N$4 billion) for the 24 weeks to June 13, just ahead of a consensus forecast of 366 million.The half-year dividend rose four per cent to 3,8 pence a share.The group warned, however, that higher commodity prices along with pension and staff benefits had cost it 50 million pounds (N$550 million) in the half-year and currency effects, largely the weak dollar against the pound, had trimmed 25 million pounds (N$275 million) off profits.Cadbury shares slid two per cent to 464 pence (N$5) by 0840 GMT as analysts noted that underlying sales only just met the firm’s own target and the company cautioned it faced challenging integration projects surrounding Adams in the second half.Underlying sales rose three per cent and operating profit margin rose 30 basis points in the first half.These compare with its goals to raise sales 3-5 per cent a year and increase margins 50-75 basis points under its Fuel for Growth strategy.Cadbury launched this last October to make annual savings of 400 million pounds (N$4 billion) by 2007 from job cuts and plant closures, using a third of these to drive sales growth and the rest to push up profitability.Cadbury is also targeting a free cash flow of 1,5 billion pounds (N$16,5 billion) over 2004-2007.Analyst David Lang at Investec said Cadbury’s confectionery business put in a solid performance and although American carbonated drinks such as Dr Pepper did well its non-carbonated drinks such as Snapple and Mott’s struggled.He is holding his 2004 pre-tax profit forecast at 925 million pounds (N$10 billion) and keeping his “buy” recommendation on the stock, even though the stock has already outperformed the FTSE 100 index by around 27 per cent over the past year.-Nampa-Reuters