Cadbury profits jump pushes shares higher

By David Jones

LONDON (Reuters) - Confectionery giant Cadbury (CBRY.L) beat forecasts with a 46 percent rise in first-half profits and gave an upbeat outlook, shrugging off fears of consumer downturn, which helped to boost its shares.

However, the London-based group which makes Dairy Milk chocolate, Trident gum and Halls cough drops warned of possible further cost cuts and job losses as it faces an uncertain economic outlook and further rises in input costs into 2009.

Chief Executive Todd Stitzer said after a 7.3 percent rise in underlying first-half sales, that full-year growth would be around the top of its medium-term 4-6 percent range while the operating margin will meet a consensus market forecast of some 11 percent.

"No matter how bleak economies look, people always go for treats and that's why we have seen no real slowdown in the first half and we see confectionery as a robust category in difficult economic conditions," he told a conference call on Wednesday.

Cadbury shares rose 0.6 percent to 629 pence by 0905 GMT having outperformed the FTSE 100 .FTSE index by over 6 percent this year, making them one of the highest rated European consumer stocks boosted by continued takeover talk.

"This is a strong performance," said analyst Jeff Stent at Citi, while Charlie Mills at Credit Suisse said: "Revenues are in line, but margins well ahead of our estimates".

Martin Deboo at Investec Securities added: "We expect to upgrade our numbers modestly but advise investors to sell into any post-results strength", citing Cadbury's high valuation.

Deboo sees bid speculation overdone, risks from a Mars/Wrigley combination and worries over the high level of cost cutting necessary to deliver its margin performance.