Cadbury boosted by strong start to 2008

By David Jones

LONDON (Reuters) - Cadbury, the world's biggest confectionery group, expects first-half sales growth of around 7 percent, but its strong start to 2008 will slow slightly in the second half as commodity cost rises bite.

The London-based group, which makes Dairy Milk chocolate, Trident gum and Halls cough drops, said on Thursday it was confident for 2008 despite challenging economic conditions and further rises in the cost of raw materials in the second half.

Cadbury (CBRY.L), which spun off its North American beverage business Dr Pepper Snapple (DPS.N) last month, is expecting first-half growth above the top end of its 4 to 6 percent target range, after saying second-quarter sales growth is likely to be modestly higher than the 7 percent growth in the first quarter.

It also said trading margins are expected to be ahead by 1.5 percentage points despite increased marketing spend, as it pushes up prices to offset rising commodity cost inflation.

"The outlook is very strong and we have great momentum going into the second half," said Chief Executive Todd Stitzer. He said growth in sales and margins will be biased towards the first half after a strong second half in 2007.

Cadbury shares were up 1.4 percent at 633-1/2 pence by 1:05 p.m. in a largely flat FTSE 100 .FTSE, having traded in line with the blue-chip index so far this year.

MARGINS IMPROVE

"Cadbury delivered a strong Q2 trading update with buoyant organic growth and meaningful margin improvement," said Numis Securities analyst Ian Kellett, who sees scope to increase his 2008 sales growth forecast of 5.8 percent, while holding his estimate for an annual margin rise of 1.2 percentage points.