Cadbury chief hails latest trade figures as proof of confidence
Cadbury put its US predator under pressure yesterday with an “excellent” third quarter trading performance.
The Dairy Milk-maker, which last month rejected a £10.2 billion proposal from Philadelphia and Oreos firm Kraft, reported a seven per cent rise in underlying sales between July and September, beating even the most optimistic growth forecasts.
Chairman Roger Carr said the latest business update reaffirmed Cadbury’s confidence its future as an independent company.
The reaction from the London stock market to the figures was subdued, with investors seeming to take the view that Kraft is unlikely to raise its offer in the absence (so far) of a counter-bid.
The stock hit a 52-week high of 808p at one stage but fell back amid profit-taking to close 1.5p ahead at 800p, valuing the business at £10.964 billion.
Cadbury also increased its annual profit margin target to growth of 135 basis points while currency benefits from the weak pound are now expected to increase underlying earnings by about nine per cent and net revenue by about seven per cent.
Kraft has been issued with a “put up or shut up” deadline by the City takeover authority, with a deadline to either make a firm offer or not to bid for Cadbury by 5pm on November 9.
Reports late last month suggested Kraft was working on an £11 billion hostile bid for the chocolate giant.
Cadbury slammed Kraft’s initial proposal as “fundamentally” undervaluing the business and for being of “uncertain value” for Cadbury’s shareholders.
In a show of financial strength yesterday, the firm revealed the best performance so far this year.
Chief executive Todd Stitzer said: “We have great momentum in our business and our confectionery strategy continues to yield benefits beyond expectations.
“In the third quarter we have delivered growth in every category and every business.”
But the figures revealed that price increases were offsetting a three per cent fall in sales volumes in the three months to September 30.
In the UK, where Cadbury raised prices in the second half of last year, revenues grew by ten per cent thanks to the launch of products such as Wispa Gold.
The firm has increased prices globally to combat soaring costs of its key raw materials - cocoa and sugar.
There have been reports the group is considering decreasing the size of its chocolate bars to help keep input costs down while avoiding price rises.
Recent steps to boost margins have included the controversial shift of chocolate production to Poland, which will lead to the closure of the firm’s Somerdale factory in Keynsham near Bristol next year.
Kraft has said it wants to “undo” some of the streamlining planned by Cadbury as part of last month’s approach, such as retaining the Somerdale site and re-investing in the firm’s Bournville factory in Birmingham.
However, it admitted there may be job losses outside the UK under aims to strip out costs elsewhere from the merged groups.
Investec Securities analyst Martin Deboo said Cadbury had “come out fighting with a feisty and comprehensive” third quarter update.
Nicolas Ceron at Numis Securities said yesterday’s figures put pressure on Kraft to raise its bid.
“The competitive auction is then likely to start for real with Nestle and Hershey having to make their move,” he added.
Cadbury is the world’s second biggest confectionery company behind Mars, while Kraft ranks behind Nestle as the world number two food group.
A deal between the two would create a combined worldwide giant with annual sales of around 50 billion US dollars (£30.2 billion), according to Kraft.
