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UPDATE 5-Cadbury profit up, shares rise on 2009 outlook
February 25, 2009 / 7:12 AM / 9 years ago

UPDATE 5-Cadbury profit up, shares rise on 2009 outlook

* Cadbury 2008 pretax profit 559 million pounds

* Sees 2009 growth at lower end of 4-6 pct target

* Still looks for mid-teen percent margin by 2011

* Cadbury shares rise 4.1 percent

(Adds further Chief Executive comments, updates shares)

By David Jones

LONDON, Feb 25 (Reuters) - British confectionery group Cadbury Plc CBRY.L took a relatively upbeat view on Wednesday on demand for its products ranging from Dairy Milk chocolate to Trident gum, helping boost its shares more than 4 percent.

After meeting forecasts with a 30 percent rise in 2008 pretax profit, the maker of Halls cough drops said it expected sales to grow towards the lower end of its medium-term 4 to 6 percent target this year, enough to reassure jittery investors.

Chief Executive Todd Stitzer said he was “confident but realistic” looking into 2009 as other consumer goods companies around the world were forecasting lower growth this year.

“We are recession resilient not recession proof, with our own performance set to be resilient in a world of reduced growth,” Stitzer said in a conference call after the results.

He added chocolate eating was on the rise as the economic slowdown gripped the world with consumers stayed at home and tucking into more chocolate while chewing gum consumption was suffering as people travelled less.

“Chocolate benefits as people stay at home, but gum has suffered. Chocolate sales are holding up well as people buy multi-packs, stock up the larder, and stay at home,” he said

By 1600 GMT, Cadbury shares were up 4.1 percent at 530 pence in a largely flat London market as analysts said the group saw good growth and had cut costs as confectionery markets around the world started to slow over the last six months.

“We believe Cadbury has better growth prospects and a higher chance of corporate activity than Hershey, and indeed the food sector as a whole, and as such reiterate our buy recommendation,” said analyst Graham Jones at Panmure Gordon.

The London-based group posted 2008 pretax profits of 559 million pounds ($814 million), in line with an analyst range of 525 million to 580 million and compared to a consensus of 552 million. Earnings per share rose 30 percent to 29.8 pence.

“In the current market environment, we find it unlikely that there are many companies continuing to grow earnings at these enhanced levels ... and also doing it consistently, which Cadbury should over the next few years,” said Andrew Wood at Bernstein.

Stitzer said the group had seen good growth across all its businesses with chocolate sales up 6 percent, gum up 10 percent, and candy up 6 percent. Its emerging markets, nearly 40 percent of its business, saw growth of 12 percent.

The group also reported higher 2008 margins, up 1.8 points to 11.9 percent, with underlying margins up 1.5 percentage points and the rest of the increase coming from currency. It stuck by its goal to see mid-teen percentage margins by 2011.

“The key element of the results seems to us to be the continued margin progress ... this has been achieved despite mounting fears of some form of input cost related disappointment,” said Rob Mann at Collins Stewart.

Cadbury is facing higher cocoa prices, which hit a 24-year high in late January, and also other dollar-dominated commodities as well as the threat from a new industry leader Mars-Wrigley on top of the slowdown in world markets.

Cadbury shares trade on 13.9-times 2009 earnings, reflecting the defensive nature of confectionery and its margin gains, putting it ahead of Swiss-based Nestle NESN.VX on 12.8-times, but still behind Hershey (HSY.N) on 17.3-times, which gains from its big share of the U.S. confectionery market.

Cadbury, which spun off its North American beverage business Dr Pepper Snapple (DPS.N) last May, agreed in December to sell its Australian beverage business to complete its exit from soft drinks and to focus exclusively on confectionery.

The 2008 dividend rose 6 percent to 16.4p a share. (Editing by Rupert Winchester and Andrew Macdonald)

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