Cadbury Schweppes CEO Todd Stitzer today (19 February) issued a bullish message to the company’s investors that it can meet its margins targets.
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Cadbury has faced some criticism over its performance in recent months, not least from activist US investor Nelson Peltz, who in December threatened to become “more active” if the company failed to progress in 2008.
Stitzer, speaking to reporters after Cadbury issued its 2007 financial results, said the company and its management had a track-record of improving margins throughout the business.
“When we bought [US confectioner] Adams in 2003, its margins were 11% – now they are in the very high mid-teens,” Stitzer said. “That shows we are capable of delivering significant margin growth for our total confectionery business.”
Peltz, who owns a 4.5% stake in Cadbury, has been widely seen as the catalyst for the ongoing restructuring at the company, including plans to de-merge its drinks interests and streamline its confectionery operations worldwide.
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By GlobalDataThe investor has demanded “meaningful operational progress in 2008” and, in an echo of his words, Stitzer said Cadbury would deliver “meaningful margin progression” this year. “We are on our way to delivering mid-teens margins by 2011,” he said.
Cadbury, the world’s largest confectioner, booked a 4% rise in underlying profits to GBP1.1bn (US$2.1bn) for 2007, although the result excluded currency fluctuations. When exchange rate movements were included, profits dipped 2%.
Revenue rose 11% to GBP7.9bn on a constant-currency basis, with sales driven by strong Trident gum sales and a recovery for Cadbury Dairy Milk in the UK.
Stitzer said Cadbury expects to see its commodity costs rise by 5-6% this year but added that the company would look offset these increases through price rises.
Cadbury said the demerger of its drinks operations in the US from its confectionery business would be complete during the second quarter of the year.
Roger Carr will become chairman of Cadbury, the stand-alone confectionery company. Wayne Sanders, former president and CEO of Kimberley-Clark, will be chairman of drinks business Dr Pepper Snapple Group.
