Cadbury Plc has said that it is expecting its first half revenues to come in above its goal range. The UK-based confectioner also said that it had made good progress on margins, with price rises off-setting rising costs.
In a statement released today (19 June), Cadbury said that it had achieved strong first half revenue momentum: with growth now expected to be above its 4% – 6% goal range. This had been driven by growth across all categories and double-digit growth in emerging markets.
The company said that margins were at least 150bps ahead despite increased investment in marketing, whilst higher prices had helped recover increases in input costs.
Todd Stitzer, Cadbury’s CEO said: “We’re off to a strong start as a focused confectionery business and expect first half revenues above our goal range and good progress on margins. These results will demonstrate the strength of our total confectionery platform, the benefits of the significant investments made in recent years and the potential of our business. Despite the challenging economic outlook and further increases in input costs in the second half, we are confident of a successful outcome for 2008.”
In the UK, Ireland, the Middle East and Africa (BIMA), revenue growth has been driven by higher marketing and double-digit growth from the emerging market businesses, the statement said.
Profit and margin progress in the first half will be strong with margins benefiting from a further improvement in Nigeria, cost reduction initiatives and lower one-off costs in the UK and Ireland.
In the UK, revenue growth is expected to be ahead of the confectionery market, which is ahead 2% year-to-date. The exit from some less profitable promotions has been more than offset by good growth in core brands, including Cadbury Dairy Milk, Cadbury said.
However, in Europe, planned route to market changes in Russia and Turkey and lower market growth in Southern Europe impacted performance.
“Gum growth remains strong reflecting the combination of market growth across the region and share gains in Southern Europe. In Turkey, we are integrating our existing distribution infrastructure with the Intergum business we acquired last year and revenues in the half are being impacted by the exit from a number of distribution arrangements. Overall, margins are expected to be lower in the region in the first half given the route to market reorganisation,” the statement said.
In the US, the gum market is ahead 8% in the year to date, benefiting from the 2007 price increases and continued high levels of innovation activity. Growth continues to be driven by the group’s Trident and Stride brands.
“Our performance in the US has been boosted by improved results from Halls which benefited from robust cough category growth. Revenue momentum in Latin America remains strong with good results from both gum and candy, particularly in Mexico where we have continued to make share gains,” Cadbury said.
In Asia Pacific, revenue growth in the half benefited from an improved performance from confectionery in Australia and strong double-digit growth in emerging markets.
The company said that it was expecting commodity cost increases for the year to remain in the 5% – 6% range, however, these increases are now expected to be weighted toward the second half.
“Overall, while we expect some bias in revenue and margin growth toward the first half, we remain confident of a successful outcome for 2008,” the statement concluded.