Chocolate maker Cadbury plc (CBY,CBRY.L, CDSCF.PK) on Wednesday reported a 7% increase in revenues for the third quarter on a constant currency basis, as the company delivered growth in every category and every business. The company also upgraded its full year guidance for revenue growth and margin improvement.
The UK-based company has operations in chocolate, gum and candy. The quarterly revenue growth reflected price mix benefits of around 10%, while volumes declined around 3%.
The company noted that chocolate and candy products benefited from a strong stay-at-home trend in the third quarter, while more functional or 'activity-related' products saw some signs of improvement, after a slow start to the year.
In Chocolate, revenue grew 7%, led by continued strong performances in the UK, India and South Africa. In the UK, revenues benefited from the third quarter launch of Wispa Gold and the second quarter launch of the Bitesize bags.
Third-quarter revenues from gum and candy increased 4% and 11%, respectively, due to strong performances in emerging markets and growth in North America and Europe. In gum category, the launches of Trident Layers in the U.S. and Trebor mint gum in the UK in September saw modest benefit.
In candy, Halls, according to the company, delivered excellent growth in the quarter, with increased share in the U.S. and good product innovation in Brazil around Halls Creamy. The company's mainstream candy brands maintained good growth in the UK, Australia and Middle East and Africa.
On a market basis, revenue grew 10% in emerging markets and 5% in developed markets. Revenue grew 10% in Britain & Ireland and edged up 0.4% in Europe. In emerging markets, revenue from South America was up 18%, Asia and Middle East and Africa registered an increase of 14%.
Marketing investment as a percentage of sales was 10.4% on a constant currency basis, reflecting the benefits of media deflation. Absolute spend on marketing on a constant currency basis in the quarter was unchanged.
The maker of Dairy Milk chocolate also recorded year to date revenue growth of 5%, ahead of previous guidance for the year, reflecting increased momentum during the course of the first three quarters of the year.
The company noted that year-to-date savings from its Vision into Action plan reduced SG&A costs by about 110 basis points. The plan began in 2007 focusing on maintaining the company's strong revenue momentum, while significantly improving its operating margins.
Cadbury said totay, "...even if we experience a continuation of weaker market conditions or higher input costs, our improved revenue momentum and excellent margin progress to date mean that we are confident of achieving our Vision into Action goals of 4-6% organic revenue growth per annum and good mid-teens margins by 2011."
The company said that 2009 revenue growth in constant currency is now expected to be around the middle of its 4%-6% goal range. Underlying operating margin in 2009 is now estimated to improve by at least 135 basis points in constant currency from 11.9% in 2008.
Cadbury is trying to fend off a bid from U.S. food company Kraft Foods Inc. (KFT). In late August, Kraft made a cash-and-stock takeover proposal to the Board of Cadbury, which was rejected by the company. On September 7, Kraft announced the terms of its proposal to acquire Cadbury for 745 pence a share, totaling about GBP 10.2 billion, and the Board of Cadbury rejected that proposal too on the grounds that it made no strategic or financial sense for Cadbury and fundamentally undervalued the company and its prospects.
Late last month, the U.K. Takeover Panel ruled that Kraft must announce a firm intention to make an offer for Cadbury or abandon its bid by November 9. If Kraft announces that it does not intend to make an offer for Cadbury, the world's second- largest food maker would be restricted from making an offer for six months from the date of such an announcement.
Roger Carr, Chairman of Cadbury, said today, "The strength of our operating performance continues to underpin the Board's confidence in both our growth prospects and the potential for creating further, material shareholder value as a pure play standalone confectionery business."
Cadbury said today that due to the unsolicited proposal from Kraft, it cannot say when its first investorseminar, originally scheduled for November 11, will take place.
CBRY.L is currently trading at 805.50 pence, up 7.00 pence or 0.88%, on 269,638 shares.
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