Cadbury profits melt by a third

PROFITS at drinks and sweets giant Cadbury Schweppes fell by a third last year amid troubles at 7-Up in the US, but new-broom chief executive Todd Stitzer is confident of delivering on his promise of massive cost savings in the coming year.

American Stitzer shocked the sprawling empire's 55,000 employees last autumn when he declared the once-paternalistic company would shed 10% of its workforce and shut one-in-five factories. The so-called Fuel for Growth plan seeks to cut annual costs by £400 million by 2007.

Today's figures for the year to 28 December, showed why. Pre-tax profits crashed from £830 million the year before to £564 million on turnover of £6.44 billion - up on the previous £5.3 billion thanks to acquisitions.

Stitzer preferred to focus on the underlying picture, which saw earnings per share up 2%, and declared: 'Our performance was resilient in a transitional year.î

That underlying earnings figure was made possible only by ignoring the staggering £224 million charge for exceptional items - £171 million higher than the year before and caused mainly by the restructuring under Fuel for Growth. Further big hits were taken on goodwill for its flurry of acquisitions and extra interest charges levied for funding the deals.

In 7-Up, the group was hit hard by Pepsi Bottling's decision to stop distributingthe fizzy drink in the US. Meanwhile, Cadbury faced a hot summer in Europe - bad news for confectionery but good for fizzy drinks - and a big currency impact from the weak dollar. Meanwhile, it has been facing tough competition from Wrigley's chewing gum for its Adams division - the Dentyne gum and confectionery operation it bought last year for £2.5 billion.

However, many analysts have upgraded forecasts in the hope of big future benefits from the Adams deal, which is seen as a canny move to gain exposure to the 'healthyî sugar free gum market. Recent data on market share showed Adams starting to turn round the loss of market share to Wrigley's seen at the start of the year.

The integration of Adams was still going according to plan, said Stitzer. He added that the first weeks of trading across the group in the current year had been 'encouragingî though rising costs of raw materials, pensions, healthcare, insurance and IT depreciation are on the horizon.

Cadbury Trebor Bassett, the UK confectionery division, had a record year of market share and profits, with sales jumping 7% thanks to strong Easter and Christmas sales. The Dairy Milk relaunch saw sales for that brand jump 13% while Halls, part of the Adams inheritance, sold better than expected.

Last month, Stitzer completed his boardroom line-up with the appointment of respected finance director Ken Hanna.

The total dividend comes in at 12p a share against 11.5p last year.