Cadbury results raise the bar
Cadbury increased its full-year profitability and revenue forecasts after reporting that underlying sales rose 7% in its July-September quarter. Shares in the company initially rose 1.2% to 808.95 pence, the highest since its 2008 soft drinks demerger, and well above Kraft’s current cash and share offer worth 726 pence. Despite this, analysts said the current absence of a counter bidder lowered a possible raised offer from Kraft.
Cadbury said it expected 2009 sales growth of around 5%, up from 4% previously, and its operating margin percentage to jump at least 1,35 percentage points rather than its old target of 0,80-1,00 points. It cited a “strong” performance in emerging markets from South America to India and China “€ the same markets Kraft is seeking to expand in by acquiring the group.
The sales performance and improved outlook were “a return to the growth we’ve had in the business for quite some time”, CEO Todd Stitzer said. “We have confidence in our growth prospects as a pure-play standalone confectionery business spending.”
European sales began rising again in the third quarter, increasing 0,4% as “robust growth” in Poland and Russia offset “still pretty dismal” Western European markets such as France and Spain, Stitzer said. Emerging markets were “coming back a bit quicker,” he said. Revenue growth of 14% in Asia was led by India and China, while South American sales rose 18%, helped by price increases and higher sales of more expensive products such as sugar- free gum.
Confectionery volumes still fell by 3% amid concerns that the good news has been bought through in-store promotions. Stitzer denied this and said that the financial update would have been the same regardless of £10.2billion approach from Kraft. “The current plans have been in place for the last 12-13 months and are not a short-term reaction to a market event that was beyond our control.”
