(Adds comment from the CEO, CFO and an analyst.)
By Michael Carolan
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Cadbury PLC (CSG) Thursday said it was confident it would meet full-year expectations after growing second-quarter sales above its targets, though it said growth in sales and margins would be weaker in the second half of the year.
The maker of Dairy Milk chocolate and Trident chewing gum said that comparable sales in the second quarter would be "modestly higher" than the 7% reported for the first quarter. The company has a target for growing confectionery sales by 4% to 6% a year. Good progress had also been made on margins, with growth of "at least 150 basis points" expected despite increased marketing investment.
"Overall, while we expect some bias in revenue and margin growth toward the first half, we remain confident of a successful outcome for 2008," said Chief Executive Todd Stitzer in a statement.
Investec analyst Martin Deboo said the update was in line with his expectations, while the guidance of a second-half slowdown is not unreasonable given the tougher comparatives last year.
By 0725 GMT, the shares were up 7 pence, or 1%, at 632 pence in a flat London market.
The update is Cadbury's first as a standalone confectionery company. Cadbury split from its American Beverages division last month. The division - now called Dr Pepper Snapple Group (NYSE:DPS) (DPS) trades on the New York Stock Exchange.
Chief Executive Todd Stitzer said on a conference call with reporters that the new Cadbury was off to a very good start with strong revenue momentum and good progress on margins.
The company said the slower rates of growth expected in the second half of the year were a result of tough comparative figures from the second half last year and a second-half weighting of commodity cost increases - which are expected to be in the 5% to 6% range for the full year. The reiterating of the input cost guidance was reassuring to the market given the recent spike in cocoa prices.
Cocoa prices hit their highest level in more than 20 years overnight Wednesday on reports of a possible supply squeeze in Ivory Coast.
Finance Director Ken Hanna said on the call that he was comfortable with the full-year guidance on commodity costs.
"We don't buy an awful lot of cocoa from the Ivory Coast," he said. Cadbury buys most of its cocoa from long-term partners in Ghana.
Hanna admitted, however, that if the problems persist, the entire industry could be impacted in 2009.
The higher second-half costs were largely related to the higher oil price, said Hanna. Oil prices impact energy, transport and packaging costs for Cadbury.
CEO Stitzer said the company had raised prices to some extent in all of its territories around the world to recover higher input costs. Price rises have averaged between 5% and 6%, he said.
The company's shares are trading at similar levels to their post-demerger price. They had initially risen on consolidation hopes, though those hopes have now subsided somewhat.
The speculation followed news that Mars Inc. of the U.S. was buying gum maker Wm. Wrigley Jr. Co. (NYSE:WWY) (WWY) in a $23 billion deal.
Analysts have long speculated that a merger between Cadbury and U.S. rival Hershey Co. (NYSE:HSY) (HSY) would be a good fit. The two have discussed a possible combination a number of times, though Hershey's 78%-owners - The Hershey Trust - has always been reluctant to relinquish its controlling stake in the company. Cadbury is also seen as a potential target of Kraft Foods Inc. (NYSE:KFT) (KFT).
"We don't feel we have to do a deal," said Stitzer. "We have a tremendously broad and deep portfolio," he added, we're focussed on making our model work very well."
The move to spin off the drinks division was prompted by news early last year that U.S. activist investor Nelson Peltz had taken a stake in Cadbury.
Company Web site: http://www.cadbury.com
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@ dowjones.com
(END) Dow Jones Newswires 06-19-08 0411 Copyright (c) 2008 Dow Jones & Company, Inc.
