UK's Cadbury sees smoother 2004
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LONDON, England (Reuters) - The world's biggest confectioner Cadbury Schweppes said on Wednesday it expected healthy growth this year, boosting its shares despite a dip in 2003 profit as it digested U.S. sweets firm Adams.
The maker of Dairy Milk chocolate and Dr Pepper drinks, which has been cutting costs and jobs to consolidate a recent acquisition spree, said tough trading conditions eased in the fourth quarter of 2003 and it made a good start to the new year.
"The outlook for 2004 is encouraging,'' Chief Executive Todd Stitzer told reporters.
Cadbury, with roots in an 18th-century drinks firm and a 19th-century chocolate seller, struggled in 2003 with an abnormally hot summer in Europe, which hit chocolate sales, while its key drinks market in North America was hit by unusually cold weather.
At the same time, it was integrating its $4.2 billion purchase of Adams.
Profit before tax, goodwill and exceptional items fell one percent to £922 million ($1.7 billion) in 2003, beating analyst forecasts of £906-£915 million. The dividend rose five percent to 11.5 pence per share.
"They've done slightly better than expected and that should underpin the share price,'' said David Lang, an industry analyst at Investec Securities. "But there's still a long way to go.''
At 0920 GMT, Cadbury shares were up 1.4 percent at 439 pence, valuing the maker of Trident sugar-free gum and Snapple soft drinks at about £9.1 billion. The stock touched a 17-month high of 453p shortly after the open.
Growth tempered
Cadbury announced plans in October to cut 5,500 jobs and save 400 million pounds a year from 2004 to 2007, sharpening up its operations after a three-year, £4.9-billion spending spree. At the same time, it unveiled targets to boost net sales by three to five percent and margins by 50-75 basis points.
"We expect to deliver 2004 financial performance within our goal ranges,'' Stitzer said on a conference call, adding the firm had cut 1,300 jobs and closed six factories so far.
Stitzer also welcomed news that Berkshire Hathaway, the vehicle of billionaire investor Warren Buffett, had bought 10 million shares in Cadbury. He viewed this as a "value investment'' rather than the prelude to a takeover.
Turnover rose 22 percent to £6.44 billion in 2003, boosted by the Adams purchase.
European confectionery sales were particularly strong, driven by the relaunch of Cadbury's Dairy Milk bar, while U.S. soft drink sales recovered from a weak first-half following a greater focus on diet Dr. Pepper drinks.
Cadbury, which also makes Crunchie bars and Halls cough drops, said strong growth in underlying profits in 2004 would be tempered by higher cocoa prices, pensions, healthcare, insurance and depreciation costs.
Finance Director David Kappler said the weaker U.S. dollar would also knock about eight percent off profits this year if it remained around its current levels.
Cadbury said the integration of Adams was going according to plan and expected £75 million of savings in 2004 from its restructuring plan, called "Fuel for Growth.''
Stitzer also said Cadbury would look at Brazilian chocolate firm Garoto if it came up for sale. Earlier this month, Brazil's anti-trust body ordered Switzerland's Nestle to sell the unit it bought only two years ago in a $230 million deal.
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