British confectionery giant Cadbury reported a 6 per cent rise in third-quarter underlying sales as it announced a further 580 job cuts to keep it on track to meet its annual sales and profit margin goals.
The London-based group, which makes Dairy Milk chocolate, Trident gum and Halls cough drops, said it was not immune to the current financial crisis and economic slowdown but it operated in relatively resilient markets for chocolate, gum and candy.
"Our business is affected to some extent, but we operate in broad markets for affordable treats and are less affected in difficult times," chief executive Todd Stitzer told a briefing following a third-quarter trading update.
Cadbury, which is facing a slowdown in world markets, higher cocoa prices and the threat from new industry leader Mars-Wrigley, said its nine-month revenues rose 7 per cent after a first-half increase of 7.3 per cent.
"This appears a strong update. We would expect the shares to react positively today," said analyst Jeff Stent at Citi.
Cadbury shares rose 3.3 per cent to 515 pence in a London market up 3.7 per cent by 8.50am. They have underperformed the FTSE 100 by three per cent and DJ Euro food and beverage industry by 8 per cent since early September.
Cadbury announced 250 job cuts as it swept away its regional structure, which will see its seven business units report directly to the chief executive.
A further 330 jobs will go in its Australian and New Zealand confectionery business and it is still reviewing the future for its Australian beverage business, which many analysts believe will eventually be sold off.
These further job cuts come after Cadbury announced in June 2007 that it would cut 15 per cent of its staff and factories to streamline its operations; which would mean a loss of 7,500 jobs worldwide and the closure of ten plants.
The group added it expected commodity and input costs to rise between 6 per cent and 8 per cent in 2009, after an estimated rise of 5-6 per cent for 2008, with Finance Director Ken Hanna warning of cocoa "cost headwinds" and high energy costs.
Cadbury reiterated 2008 sales growth would be around the top of its medium-term 4-6 per cent range while its operating margin will meet a consensus forecast of 11 per cent from 2007's 9.8 per cent. It aims for a mid-teens operating margin by 2011.
Cadbury, which spun off its North American beverage business Dr Pepper Snapple in May, lost its crown as the world's largest confectionery group when US-based Mars completed its takeover of chewing gum group Wrigley earlier this month.
Reuters