Cadbury Schweppes profit triples after sale of soft-drink brands

Cadbury Schweppes PLC, the maker of Dairy Milk chocolate as well as Dr Pepper, Mott's Apple Juice and Trident gum, said Wednesday that first-half net profits more than tripled on a one-time gain after the company sold soft-drink brands including Orangina.

The confectionery group, which gained from asset sales, expects to deliver strong full-year results despite the impact of product recalls over salmonella contamination.

The London-based company said overall income for the six months ended June 30 rose to 819 million pounds (US$ 1.53 billion; euro1.2 billion), from 237 million pounds a year earlier. A Bloomberg survey of five analysts showed a median estimate of 735 million pounds.

However, the company acknowledged that the figures were supported by the sales of beverage businesses in Europe, Syria and South Africa that led to a one-time gain of 541 million pounds (US$ 1.01 billion ; euro792 million).

Sales rose 15% to 3.42 billion pounds (US$ 6.38 billion; euro5.01 billion), from 2.79 billion a year ago, the company said.

Cadbury is using money from disposals including last year's $ 2.2 billion sale of its European soft-drinks unit to expand gum sales and American diet-soda activities. The company is developing soft drinks with less sugar such as fruit-flavored 7UP Plus with added calcium to narrow the gap with PepsiCo Inc. and Coca-Cola Co.

“The Americas beverages, Dr Pepper, A&W, Mott's, are all doing well, and U.S. confectionery is also doing better than expected,'' said David Lang, an analyst at Investec Securities in London with a “hold” recommendation on Cadbury. “Europe is struggling.”

Meanwhile, Chief Executive Todd Stitzer said in a company statement, "We expect to deliver underlying revenue growth towards the upper end of our goal range for the full year, but are still monitoring the trading impact of the U.K. recall."

On June 23, Cadbury notified Britain's Health Protection Agency that it had traced salmonella contamination at a plant and withdrew seven varieties of chocolate. Government investigators detected 13 cases of salmonella infection to contaminated chocolate.

The withdrawal would cost 20 million pounds (US$ 37.3 million; euro29.2 million) over the full year, the company said today. The outbreak forced Cadbury to stop advertising on U.K. television soap opera “Coronation Street.”'

"While chocolate sales in the U.K. have been impacted by extremely high temperatures in the last four weeks, the recall has also had an impact on performance," the company statement said.

“As we head into the crucial Christmas period, they have a huge job in getting the brand back to where it should be with consumers,” the analyst Lang said.

Confectionery revenue in the U.K. tumbled 6.6% in the four weeks to July 22, hurt by hot weather and a 14% decline in sales of chocolate, Stitzer said.

However, the shares earned 21 pence, or 4%, to 542 pence at 9:50 a.m. in London. They have lost 1.4% in the past six months as the 43-member Bloomberg Europe Food Index has gained 9.1%.