Cadbury Schweppes today (2 August) reported a 14% rise in first half profits and said that it expects to hit the top end of its full year revenue growth targets, despite the negative impact of the massive UK recall triggered by salmonella contamination in some of its top-selling products, including its flagship Dairy Milk brand.
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The confectioner and soft drinks manufacturer posted pretax profits before exceptional items of GBP402m (US$754.4m), a 20% rise up from GBP322m last year. With the effects of currency conversion taken into account, profit rose by 14%.
Cadbury reported revenue growth of 4%, which it said was driven by product innovation and expansion into emerging markets. The confectionery segment reported accelerating growth, with sales of Trident up by 31% and Cadbury Dairy Milk up by 7%. The company said that growth in its beverage segment was good, with US carbonate share gains led by Dr Pepper, which was up by 3%, Sunkist, which grew by 10%, and A&W Root Beer, which increased by 11%.
Despite rising costs, margins at Cadbury have also improved. The company said that underlying operating margins reached +10bps.
CEO Todd Stitzer said: “Our performance in the first half of the year has been good with three out of four regions performing well. Exciting new innovation is driving growth in both beverages and confectionery. We expect to deliver revenue growth towards the upper end of our goal range for the full year but are still monitoring the trading impact of the UK product recall.”
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By GlobalDataCadbury has faced a considerable amount of negative publicity following the recall of seven product lines after salmonella was detected in January but the company failed to notify the proper authorities until June. The cost of the recall is expected to be GBP20m for the full year, the company said.
“While chocolate sales in the UK have been impacted by extremely high temperatures in the last four weeks, the recall has also had an impact on performance,” the company said. “In the latest four weeks, the UK confectionery market was down 7% year-on-year and our share was 1.1% lower over the same period.”
Revenue totalled GBP3.42bn, while net profit for the period was GBP819m – up from GBP237m last year. However, these figures are distorted by the sale of Cadbury’s European soft drinks business.
The news appears to have been well received, with shares in Cadbury Schweppes increasing by 3.07% to 537pence at time of press.
