Cadbury off to 'good start' but tough trading ahead
remains on track to meet its annual financial targets, although
warned of tough trading conditions in the second half, Tom
Armitage reports.
In a trading statement released ahead of the company's annual general meeting today, Todd Stitzer, Cadbury's CEO, said that the London-based company had made a "good start to the year," and added that its confectionery and beverage businesses had continued their sales momentum from last year.
"Margins in the first half are forecast to be broadly unchanged despite increased investment in growth and some above inflation cost increases. For the full year, we continue to expect to deliver results within our goal ranges," he commented.
The company, which manufactures Europe's best-selling tablet-format chocolate brand Dairy Milk, said that innovation and a continued focus on its core Cadbury, Maynards and Bassett's confectionery brands were continuing to drive sales gains for its UK business.
Internationally, the company's confectionery businesses had been buoyed by a combination of market growth and market share gains, particularly across its chewing gum range, which includes the Trident, Hollywood, Dentyne and Clorets brands, together with its Hall's functional confectionery division.
Analysts, however, remained largely unimpressed by the trading statement; JP Morgan, for instance, described it as "reasonably good but fails to impress".
Conversely, Bernstein Research warned: "Investors hoping for more impressive guidance, or perhaps even an increase in guidance to the top-end of the target ranges, are likely to be disappointed."
In October 2003, Cadbury unveiled its four-year "fuel to growth" plan, which outlined its ambition to achieve annual turnover growth in the range of 3-5 per cent (excluding the impact of acquisitions at constant currency) and an annual increase in operating margins of 50-70 basis points a year.
The company confirmed that its plans to achieve cost savings of around £400 million (€586 million) by 2007 were performing to expectations.
By the close of 2005, for instance, Cadbury will have saved around £100 million (€146 million) - although this figure will be unequally biased towards the second half of trading.
The company also said that the transition of its Adams confectionery business in Canada to Cadbury Schweppes' back-office and logistics infrastructure had "gone smoothly."
Despite a Europe-wide drive to combat obesity and diet-related health problems largely hampering European chocolate sales, Cadbury's stock value has risen by over 27 per cent over the previous year and is currently worth around £11.5 billion (€16.8 billion).
