UPDATE: Cadbury CEO Says Co Has A Lot More To Deliver
16 September 2009 - 1:20PM
Dow Jones News
Cadbury PLC (CBY) Chief Executive Todd Stitzer provided
investors with an upbeat view of the U.K. confectioner's progress
and prospects Wednesday, saying Cadbury had a lot more to deliver,
as pressure continued to mount on Kraft Foods Inc. (KFT) to raise
its GBP10.2 billion bid for the company.
Updating the market on Cadbury's "Vision Into Action" plan at an
analysts' presentation in London, Stitzer said the company was
delivering on its promises for higher revenue growth, margin
improvements and strong earnings growth.
He said the company would start generating strong free cash
flows from 2010 onwards as its major capital expenditure comes to
an end. This will "generate returns to shareholders and provide the
funds to capitalize on new growth opportunities," he said.
"We're confident Cadbury has a lot more to deliver."
Sept 7, U.S. food giant Kraft, based in Northfield, Ill.,
offered to pay 300 pence in cash and 0.2589 new Kraft Foods shares
for each Cadbury share - valuing the U.K. company's share capital
at GBP10.2 billion.
The bid was immediately rejected by Cadbury as too low and the
U.S. giant is now under pressure to increase its bid.
Cadbury is currently trying to convince investors that it has
strong prospects as an independent company. It is on track with its
"Vision Into Action" plan - which aims to grow sales 4%-6%
annually, while boosting operating margin to a mid-teen percentage
from around 11% by 2011.
"We are increasingly confident that we will be able to deliver
the full benefits of our plans and achieve our goal of delivering a
good mid-teens margin performance by 2011," said Stitzer.
While Stitzer's record over the last two years is well
respected, it was only two years ago that his position was under
threat, following two years of underperformance for the
company.
Stitzer's initial "Fuel for Growth" strategy of cutting costs
and growing margins ended in failure in 2007, when the confectioner
failed to meet its margin targets.
His "Vision Into Action" plan, launched in 2008 has had more
success, with sales growing strongly despite the global
downturn.
In the last two years, the company's sales growth has been a
result of price hikes rather than volume growth however, as the
group moved to pass on higher input costs to customers.
Stitzer said Cadbury's future growth will be driven by higher
volumes and further market share gains.
"There should be less need for material price increases, on the
back of lower levels of input cost inflation," he said.
Stitzer said the company planned to accelerate its "white space
market entry" through extending its distribution into countries
neighboring those where it already has a strong position.
"Acquisitions may also have an important role to play," he said.
"Our priorities here focus on finding good quality bolt-on
acquisitions."
These are likely to be in emerging markets, he said. "We have a
list of potential targets which we would work towards
acquiring."
Kraft has pledged to continue working toward a recommendation
from Cadbury for its bid, despite a swift rejection from the
Cadbury's board.
A deal would create a company with annual revenues of some $50
billion and a market share of 15% of the world's confectionary
market, according to analysts.
At 1147 GMT, Cadbury shares were up 3 pence, or 0.4%, at
791p.
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278;
michael.carolan@dowjones.com