Cadbury sees stronger second half

By David Jones

LONDON (Reuters) - Confectionery group Cadbury (CBRY.L) reported a pickup in April and May trading on Thursday and looked forward to a stronger second-half helped by new product launches for its chocolate, gum and candy.

The maker of Dairy Milk chocolate, Trident gum and Halls cough drops said growth had improved after a slow start to 2009, but this was due to the absence of de-stocking and market share gains rather than any signs of a global economic recovery.

Although mainland Europe was still a trouble spot due to weak markets in France and Spain, the group held its overall sales and margin forecast for 2009, with the slower start to the year set to be balanced by a stronger second-half.

"Trading in April and May improved due to the absence of de-stocking in the United States and some improved business performances," said Chief Executive Todd Stitzer on a conference call after a first-half trading update.

Cadbury shares edged up 0.7 percent to 525-1/2 pence by 9:25 a.m. in a slightly lower UK stock market.

Analysts expect sales at the world's second-largest confectionery group, after Mars-Wrigley, to rise around 3 percent in the first-half, accelerating to 5 percent in the second to give a 2009 rise close to company forecasts of around 4 percent.

"The shape of the April/May development is in line with our expectations," said Citi analyst Jeff Stent, adding the only surprise was that first-half margins will be higher than expected due to the new product launches in the second half.

The London-based group said growth in chocolate had remained robust since the start of 2009 while gum and candy returned to growth after a poor first-quarter. It gave no specific figures.

Its British business gained market share after a good Easter Egg season and the success of its relaunched Wispa bar, helping to offset difficult trading in Ireland, France and Spain.

As a result, it held its 2009 targets of sales growth at around the lower end of its medium-term 4 percent to 6 percent range and to make good progress towards its goal of mid-teen percentage margins by 2011, after posting 11.9 percent for 2008.

Forecasts looked for an average first-half sales rise of 3.2 percent in a Reuters survey of five brokers, and came after the confectioner saw first-quarter sales up only 2 percent, hurt by destocking in North America and weak mainland European markets.

Cadbury is the first sweets group to report on the second quarter and although its shares have fallen 14 percent this year it trades on 14.8 times 2009 forecast earnings ahead of Nestle (NESN.VX) on 13.4 but still behind Hershey (HSY.N) on 17.1.

Chancellor Alistair Darling reiterated his view late Wednesday the British economy is on track to return to growth by the end of the year, but warned there was still a great deal of uncertainty in the global economy.

Cadbury shares, which traded around 640 pence in May 2008, after its soft drinks demerger, have underperformed the FTSE 100 Index by 10 percent so far this year, and the DJ European food and beverage index .SX3P by 4 percent.

(Reporting by David Jones; Editing by Simon Jessop)