We could almost hear the sighs or relief in the boardroom as Cadbury’s posted a better than expected 7% rise in third quarter earnings today, well ahead of the 4% it had predicted for the period. The results couldn’t have come at a better time for the nation’s favourite sweet maker, embroiled as it is in a takeover battle with US giant Kraft Foods.
Cadbury’s chairman Roger Carr said it showed the company’s ability to create ‘material shareholder value as a pure play standalone confectionery business’. We don't need any help from acqusitive rivals across the pond, in other words.
Cadbury now projects 5% revenue growth at the end of the year, despite a disappointing first quarter. Notable boosts have come from strong performance in emerging markets, including an 18% rise in South America. The UK market, although slowing, still saw 10% growth. We Brits love our chocolate, recession or no.
Shares in Cadbury reached a high this morning of 808p, lending weight to the firm’s claim that the 745p a share Kraft bid seriously undervalues the business - shareholders are unlikely to argue with the Cadbury board's decision to reject it now. With a Nov 9 deadline set by the UK takeover panel, the American firm will now have to decide whether to up its offer price or not.
Kraft may well wait to respond until its own results are announced on 3rd November. But while the sales rise is certainly good news for Cadbury, it is unlikely that Kraft will back down that easily. The deal would boost their share of the world confectionary market to 15%, matching arch rivals Mars. That’s quite an incentive.
And traders have pointed out that today’s news is pretty much the least Cadbury had to do to avoid a takeover, and that a 7% increase represents no more than a return to business as usual. The big question is whether Cadbury’s shareholders, even in tough times, will demand a sweeter deal.
In today's bulletin:
Gatwick prepares for take-off with new owners
Mervyn King calls for reform as bankers set for £6bn payout
Sweet sales up as Cadbury insists it knows its Kraft
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