Cadbury profit nearly triples in first half

by Eric Schroeder
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LONDON — Net earnings at Cadbury P.L.C. in the first half ended June 30 nearly tripled behind a gain from its discontinued beverage business and strong growth in chocolate. Net income in the first half was £313 million ($515 million), up sharply from £113 million in the first half of fiscal 2008. The most recent results included a gain of £234 million related to the gain on disposal of the Australia Beverages business, while the first half 2008 results included a charge of £53 million related to the sale of the Americas Beverages business.

Earnings from continuing operations, which consists of the company’s chocolate, chewing gum and candy business, rose to £189 million from £150 million.

Net sales in the first half were £2,767 million ($4,546 million), up 13% from £2,440 million in the first half of fiscal 2008. Cadbury said sales benefited from growth in all three confectionery categories: chocolate, gum and candy.

Chocolate, which accounted for 45% of total sales in the first half, rose 10%, including a 13% surge in the second quarter. The gain reflected strong performances in the United Kingdom, India and South Africa. Australia delivered "progressively good growth" with benefits from the relaunch of the core Cadbury Dairy Milk brand in the second quarter of the year, according to the company.

Gum, which accounted for 35% of sales, posted unchanged sales growth in the first half, as a 2% gain in the second quarter was offset by a 2% decline in the first quarter. Cadbury said market share improved in key markets, except in the United States, where a major innovation program is planned for the second half of fiscal 2009.

Revenues in candy, which accounted for 20% of first-half sales, also were flat. Like gum, sales rose 2% in the second quarter after easing 2% in the first quarter. Cadbury said it experienced improved performance from Halls in the second quarter, as well as strong performances from mainstream candy brands in the United States, Middle East and Africa, Japan and mainland Asia.

"Revenue from our focus brands benefited from our strengthened global category model and increased focus on fewer, bigger initiatives," the company said. "Within chocolate, Cadbury Dairy Milk and Creme Egg performed well but were outshone by strong growth in other seasonal products and countline innovations. In candy, The Natural Confectionery Co. and Eclairs both performed strongly. For Halls, the largest candy brand in the world, first-half revenue declined overall, but improved in the second quarter after a slow start to the year. In gum, Trident, the world’s largest gum brand, grew well, reflecting strong growth in Brazil and other parts of Latin America."

In its North America business, Cadbury posted underlying profit from operations of £135 million, up 25% from £108 million in the first half of fiscal 2008. Sales rose to £648 million from £553 million.

"Modest declines in U.S. gum market share in the half were partially offset by a strong share performance in Mexico and a good recovery in the second quarter in Halls," Cadbury said. "Other traditional candies also performed well. Underlying operating margin improved … reflecting the full-year benefit of restructuring carried out in 2008, partially offset by a lower gross margin, reflecting the mix effect of lower gum sales."

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