LONDON (AP) — Candy and gum maker Cadbury PLC nearly tripled net profit in the first half of the year as the company pocketed a strong gain from its discontinued beverage business and as people ate more chocolate during the recession.
The company, which makes Cadbury chocolates, Trident and Dentyne gum, and Halls and Bassett's candies, said Wednesday that net profit was 313 million pounds ($513 million), compared to 113 million pounds during the same period a year earlier.
Revenue was up 13 percent to 2.8 billion pounds, or up 4 percent on a constant currency basis. The company confirmed its guidance that it expects full-year revenue growth at the lower end of a 4 percent to 6 percent range.
Sales of chocolate surged 13 percent in the second quarter, nearly doubling the first-quarter pace of 7 percent.
Chocolate, which accounted for 45 percent of company revenues in the first half, and bagged candies had been expected to benefit from people enjoying themselves at home rather going out during the recession, Cadbury said.
Sales of gum and candy were up 2 percent in the second quarter, offsetting 2 percent drops in the first half of the year.
The company upgraded its target on underling operating margin from a full-year increase of 0.7 percentage points to between 0.8 and 1 percentage points in constant currency values. The company reported a 1.4 point gain in the first half to 11.5 percent.
Cadbury shares were up 0.6 percent at 568 pence at midday on the London Stock Exchange.
"Cadbury is cheering investors, providing an upgrade to its profit margin expectation for the full year. Costs continue to be cut, with food commodity price costs easing and pressures in the media sector facilitating cheaper advertising rates," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers, who said the company also benefited from growing disposable incomes in emerging markets.
"Furthermore, in the face of tough economic times, consumers' desire for low cost treats such as chocolate and sweets also looks to be playing its part," Bowman said.
Cadbury said chocolate sales rose 10 percent with a market share gain in the United Kingdom and good growth in India and South Africa.
Cadbury's profit include a 234 million pound contribution resulting from the demerger of its Americas Beverages business in May 2008 and the disposal of its Australia Beverages business to Asahi Breweries of Japan in April. That compared to a half-year loss of 47 million pounds on discontinued operations last year.
On an underlying basis, the company's own measure which strips out one-time pluses and minuses, net profit fell to 191 million pounds from 237 million pounds in the first half of last year. Underlying profit from continuing operations rose to 189 million pounds from 150 million pounds.
Cadbury boosted its interim dividend by 8 percent to 5.7 pence.
"A strong chocolate performance and good growth in emerging markets more than offset a slow start in North America and continued softness in Europe," said Todd Stitzer, Cadbury's chief executive.
Britain, Ireland and North America account for more than 45 percent of the company's sales.
"We increasingly believe that the company can achieve its 4-6 percent revenue growth and reach margin targets in the prescribed time scale," said Jeremy Batstone-Carr, analyst at Charles Stanley & Co. He raised his recommendation from "hold" to "accumulate.
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