WRAPUP 2-Nestle, Hershey upbeat; no mention of Cadbury

Thu Oct 22, 2009 2:21pm EDT

* Nestle speeds up share buybacks

* Stands by 2009 outlook, says volume growth accelerating

* Hershey revenue misses estimates, profit beats

* Neither mentions possible Cadbury bid

* Nestle shares up 1.4 pct, Hershey's down 4 pct (Adds analyst and company comments, updates byline and dateline)

By Emma Thomasson and Brad Dorfman

VEVEY, Switzerland/CHICAGO, Oct 22 (Reuters) - Nestle (NESN.VX), the world's biggest food group, sped up its share buybacks on Thursday while U.S. chocolate maker Hershey (HSY.N) posted disappointing revenue, but neither hinted at a possible bid for Cadbury Plc CBRY.L.

Analysts and investors have identified Nestle and Hershey as potential partners to counter Kraft Foods Inc's KFT.N $16 billion takeover bid for chocolatier Cadbury. Neither company has been drawn out on the subject.

"It is clear that we are always looking for strategically fitting and economically viable acquisitions," said Nestle Chief Executive Paul Bulcke. But he declined to comment on specific acquisitions.

Hershey, meanwhile, cut off questions on Cadbury before they could be raised, telling analysts at the beginning of an earnings conference call that management would not comment on consolidation in the confectionery industry.

"I think you should anticipate that they would not disclose anything publicly," Fitch Ratings senior director Wesley Moultrie said, noting that neither company would want to tip their hand if they were planning to compete with Kraft.

Like many analysts, Moultrie questioned whether Hershey could afford a bid for Cadbury on its own, noting that Nestle seems focused on health and wellness acquisitions, a strategy that Cadbury would not fit into.

Results for Nestle -- a global operator in frozen meals, coffee, chocolate, baby formula and bottled water -- matched forecasts for sales in the first nine months of the year. [ID:nLM416716]

Hershey, which sells chocolate mostly in the United States, saw volume hit as it continued to push through a year-old price increase, though cost-cutting helped its quarterly earnings beat estimates and pushed its full-year forecast higher. [ID:nN22495511]

"The U.S. is a mature market, and being dependent on one market is definitely a risk," Morningstar analyst Erin Swanson said.

Kraft made a 10.2 billion pound cash-and-stock bid proposal to Cadbury in early September and has been given until Nov. 9 to come up with a firm offer. Analysts expect Kraft will have to raise its offer, and they doubt a rival bidder will emerge.

On Thursday, one of Cadbury's largest shareholders said a bid of 820 pence, or 11.3 billion pounds, would be something the investor would look at. [ID:nLM147142]

Shares in Nestle were up 1.4 percent while Hershey slumped 4 percent. Cadbury shares shed 1.3 percent and Kraft slipped 1.1 percent.

NESTLE RAISING MORE FUNDS

Cash-rich Nestle said on Thursday it would probably complete its 25 billion franc share buyback program late in the first half of next year and would likely raise fresh funds from a sale of its stake in eyecare firm Alcon ACL.N.

The Vevey-based maker of Nescafe coffee and Kitkat chocolate bars stood by its 2009 outlook, but attention was focused on its share buybacks and what it might do with its Alcon cash.

Nestle sold 25 percent of Alcon to Swiss drugmaker Novartis (NOVN.VX) last year for $11 billion and agreed on an option to sell its remaining 52 percent stake from January 2010, giving it more than enough to swallow Cadbury.

"We think they are clearing the decks for another possible big buyback announcement in 2010 post the sale of Alcon," said analyst Warren Ackerman at brokers Evolution Securities.

Reporting nine-month figures, Nestle said its underlying sales growth was 3.6 percent, in line with the consensus market forecast, with the third-quarter figure accelerating to 3.8 percent after a disappointing 3.5 percent rise in the first half.

Meanwhile, the maker of Reese's peanut butter cups and Hershey's Kisses said third-quarter profit rose to 71 cents a share from 54 cents a year earlier. Like many food companies, Hershey has raised prices to offset rising costs.

Excluding charges from an overhaul of the company's supply chain, earnings were 73 cents a share, beating an average forecast of 67 cents, according to Thomson Reuters I/B/E/S.

Revenue dipped to $1.48 billion from $1.49 billion a year earlier and was shy of analysts' average estimate of $1.54 billion. The company plans to boost advertising in the fourth quarter. For the year, it expects to spend 50 percent more on advertising than in 2008. (Additional reporting by Laura MacInnis, Rupert Pretterklieber and David Jones; Editing by John Stonestreet and John Wallace)

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