A surge in UK chocolate sales helped Cadbury Schweppes offset disappointment at its failure to sell its American drinks arm. Cadbury reported its confectionery business enjoyed a 'particularly strong' third quarter.
The Dairy Milk and Bassett firm said sales in the UK benefited from a cooler summer and a strong recovery following a product recall last year. The trading update came as Cadbury said an acceptable sale of its American drinks operation was unlikely because of debt market conditions. It will now demerge the 7Up and Dr Pepper business through a listing on the New York Stock Exchange, although it warned this could take until the spring of next year.
In July, Cadbury extended the timetable for the sale of its beverage arm in an effort to allow bidders to complete their proposals against a more stable debt financing environment. However, Cadbury said conditions have remained difficult. Chairman Sir John Sunderland said: 'With an acceptable sale unlikely in the foreseeable future, the board believes it is prudent now to focus on demerging our American beverages business.'
The business, which generates more than 80% of its revenues and profits in the United States, had been seen as a private equity target with a possible price tag of between £7 billion and £8 billion. Cadbury also said it had taken steps to improve profit margins, with the announcement of 2,500 job cuts in confectionery since June. Proposals include the closure of a factory in Keynsham with the loss of around 500 jobs.
Cadbury's shares were up 1% or 6.5p in early trading to 607p.