Cadbury to take £30m salmonella hit

Published on Wednesday 13 December 2006 01:36

CADBURY Schweppes, the world's biggest confectioner, has revealed the recent salmonella contamination scare is expected to cost the group £30 million - £10m more than thought.

In late June, Cadbury started recalling more than a million chocolate bars in Britain and Ireland because of minute traces of salmonella in a number of its products.

It has now reported that it is performing in-line with expectations, despite the cost hit, in what Todd Stitzer, chief executive, described as a challenging year.

Accounting irregularities discovered in the company's Nigerian subsidiary earlier this year are yet to be ironed out by recently-appointed accountant PricewaterhouseCoopers, while performance in the UK market has been weak.

The maker of Dairy Milk and 7UP expects Cadbury Nigeria to post an operating loss of up to 10m following a one-off charge of between 20m and 25m.

Stitzer said: "Although these have taken the edge off another year of strategic and operating progress for the group, our performance in 2006 will be in line with previous guidance."

The group expects like-for-like revenue growth to be in the middle of its 3-5 per cent range. It is still due to find out if the UK authorities will take legal action over the salmonella contamination after Christmas.

Cadbury's share of the UK confectionery market remained flat at around 31 per cent, but the group hopes to improve this with new products - two new brands of chewing gum, Trident Splash and Trident Soft, will launch at the end of January.

Despite the setbacks, analysts were mostly neutral. Keith Bowman, equity analyst at Hargreaves Lansdown, said: "Given a number of mishaps and a challenging trading background, the outcome looks almost creditable," he said.

"Cadbury's appears to have developed a habit of taking two steps forward, only to then take one step backwards. But the group is continuing to generate success in the emerging markets and news that confectionery in the US is selling well should prove well received The statement should have done enough to give management the benefit of doubt and market consensus opinion is likely to remain hold."