Cadbury Schweppes to sell European beverages business

by Staff
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LONDON — Cadbury Schweppes P.L.C. said Thursday it plans to sell its European beverages business as it focuses on more profitable lines, including operations in the United States. Cadbury Schweppes expects to commence the sale process in the near future.

Following a strategic review of Europe Beverages, Cadbury’s board of directors said it has decided to focus the group’s financial and management resources on its confectionery and other beverage businesses, which have greater potential for higher growth and returns. Proceeds from the sale initially will be used to reduce the group’s net debt, which as of June was £4.3 billion ($7.8 billion).

The company, producer of Dr Pepper, Mott’s Apple Juice, Dairy Milk chocolate and Trident gum, declined to comment on how much it would seek for the unit, but analysts said it likely could fetch more than £1 billion ($1.8 billion).

"Europe Beverages has a great portfolio of brands, a talented management team and strong routes to market," said Todd Stitzer, chief executive officer of Cadbury Schweppes. "I’m proud of the commitment and dedication of its workforce. However, the potential for growth and value creation is greater in the group’s other operations, and therefore we believe it is in the best interests of our shareowners to investigate a sale of the business."

Cadbury has been pushing a cost-cutting program since mid-2003 to respond to tough market conditions and try improve growth. Under the plan it has closed 10% of its 133 factories worldwide and reduced its workforce by 10%. Cadbury employs more than 50,000 people worldwide, with about 7,000 in Britain.

In July, the company posted a 6% increase in first half-net profit to £244 million ($439.9 million), driven by strong sales, and said it expects to meet its full-year targets despite challenging markets. Sales increased to £3.13 billion ($5.6 billion) from £2.95 billion.

Cadbury said it expects to face increased competition in the U.S. beverage market from Coca-Cola Co. and PepsiCo Inc. in the second half, along with continued high oil costs and political uncertainties in developing markets. About 20% of Cadbury’s revenues come from developing markets.

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