Cadbury, currently under siege from a Kraft Foods takeover bid, is gearing up to deliver one of the most crucial interim management statements in the company’s history this week.
Go deeper with GlobalData
Last month, Cadbury’s board rejected a GBP10.2bn (US$16.63bn) initial approach from Kraft and the UK confectioner will likely be hoping to deliver a defensive showing when Cadbury unveils its third-quarter numbers on Wednesday (21 October).
Indeed, according to analysts at Sanford Bernstein, Cadbury is expected to deliver an improved set of Q3 numbers. Volume growth is likely to return to positive territory, after a declining first quarter and flat second quarter, while the company is also expected to see the continued positive impact of pricing initiatives, Andrew Wood, Eric Scher and Paul Hess argued in their research note. According to the analysts, Cadbury is likely to post organic growth of around 6%.
“We expect the market to be pleased with the momentum and the return to positive volume growth,” Wood, Scher and Hess predicted.
While investors will be looking for signs of positive organic growth, especially in light of Cadbury’s outspoken criticism of Kraft’s “low growth” model, all eyes will also be focused on the Dairy Milk maker’s outlook for the full year.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“We believe that under Takeover Panel rules, an increase in short-term guidance (i.e. 2009) is allowed as long as it can be verified by the auditors. Therefore, if the rationale for the increased guidance is well-founded and documented, Cadbury should be able to increase 2009 guidance,” the Sanford Bernstein analysts suggested.
According to the investor note, management has been “very cautious” with its guidance – low balling its initial outlook, then upgrading, then outperforming.
“The time for prudence is in the past. We expect that Cadbury has the ability to take up guidance which will serve as a way to maximise the price Kraft is prepared/required to pay for Cadbury, thereby enhancing shareholder value, or a defence to the Kraft bid, by highlighting that there is still significant potential for the business as a stand-alone and so making it less attractive for Cadbury shareholders to sell out (at a low price) to Kraft.”
The UK Takeover Panel has given Kraft until 9 November to make a final offer for Cadbury. It is expected that the world’s second-largest food group will wait until it delivers its own third quarter results, on 3 November, before making its move.
Currently, Kraft’s bid stands at 745p-a-share. However, it is expected that the US group will have to raise its offer to in excess of 800 per share to win investors over.
Stanford Bernstein currently rates Cadbury as “outperform” with a price target of GBP9.
