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February 20, 2007

UK: Cadbury profit down on recall

UK confectioner Cadbury Schweppes posted a 12% drop in pre-tax profits for the full year today (20 February) after second half profit plummeted following the salmonella scandal which caused summer sales to slump in the UK. However, the company emphasised that it is optimistic about its financial prospects going into FY2007.

UK confectioner Cadbury Schweppes posted a 12% drop in pre-tax profits for the full year today (20 February) after second half profit plummeted following the salmonella scandal which caused summer sales to slump in the UK. However, the company emphasised that it is optimistic about its financial prospects going into FY2007.

For the year to 31 December, Cadbury reported pre-tax profits of GBP738m (US$1.44bn), down from fiscal 2005 profits of GBP835m. However, removing exceptional items profits climbed 8% to GBP931m.

Cadbury confirmed that salmonella scare and product recall cost the company GBP30m, hit sales by as much as GBP35m and cut profits by up to GBP10m.

Todd Stitzer, Cadbury chief executive, said that the company’s share of the UK chocolate market had remained flat at 34% despite the product recall, thanks to increased innovation and marketing activity in the fourth quarter.

During the period, the confectionery and soft drink manufacturer also took a goodwill impairment charge of GBP15m, to reflect an overstatement of results in its Nigerian business, and restructuring costs totalling GBP133m. 

The company said that profitability was lower in 2006 when compared to 2005, with margins declining 1.4% to 14.4% for the year.

Total sales during the period rose 15% to GBP7.43bn, while underlying sales were up 4%, driven by expansion in emerging markets and new product innovation.

Stitzer said: “Overall we made significant progress in 2006 despite the challenges faced in Europe, Middle East and Africa, with three of our four regions performing strongly.”

Soft drink sales, including the Dr Pepper and 7-Up brands, rose 4% during the year while sales of the company’s Trident gum, which was launched in the UK this month, increased 23%.

“We start 2007 with optimism and are continuing to invest behind growth, with a strong innovation pipeline including the launch of Trident, our global gum brand, into the UK,” Stitzer said. 

Cadbury shares, dropped 1.99%, of 11.5 pence, to 565 pence at time of press.
 

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