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Pressure on Kraft as Cadbury upbeat on results

By Jane Byrne , 21-Oct-2009
Last updated on 21-Oct-2009 at 13:13 GMT

Cadbury’s upwardly revised revenue forecasts are a strong defence to the bid from Kraft, claim industry analysts.

Andrew Wood, senior research analyst at Bernstein, maintains that management at the confectionery giant has successfully laid out its hand in its Q3 interim statement, to demonstrate how attractive Cadbury is, both to its own shareholders and to Kraft.

‘We consider this to be a very positive update from Cadbury. More generally, we were also pleased to see Cadbury become more aggressive, and less prudent, in its guidance,’ said Wood.

The confectionery manufacturer said that 2009 revenue growth was now expected to be around the middle of its four to six per cent goal range with improved momentum increasing its confidence for good revenue growth in 2010 and 2011.

In a report on July 9 the company had forecast revenue growth at the lower end of that range.

Sector growth

The results also show that within the product categories, chocolate growth at 7 per cent remained strong, while gum at four per cent and sugar at 11 per cent rebounded after a tougher H1.

Meanwhile growth for the company was quite balanced between the emerging markets (+10%) and the developed world (+5%).

Minimal disruption

The UK’s Takeover Panel announced a deadline of November 9 for Kraft to make a bid for Cadbury or to say that it does not intend to make an offer.

Companies that are targeted for takeover frequently approach the takeover panel seeking a so-called ‘put-up-or-shut-up’ action in order to minimize disruption to business and uncertainty for shareholders.

Kraft made an offer of £10.2bn (about $16.4bn) on August 28, but Cadbury rejected the bid, saying that it ‘fundamentally undervalued’ the company and that it ‘made no strategic or financial sense’ for Cadbury.

Meanwhile, media reports this week suggested that Kraft may look to sell its coffee brand Maxwell House to generate a higher offer to Cadbury.

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