Cadbury salmonella scare bill rockets to £30m

Cadbury Schweppes said today the summer salmonella scare in the UK cost it £30m (€44.5m) rather than the £20m (€29.6m) initially expected.

The confectionery giant was forced to take more than one million chocolate bars off UK shelves following the outbreak in June.

Sales of chocolate bars such as Dairy Milk plummeted in the following weeks and Cadbury said today that profits in the UK will be hit by the “challenging” conditions.

Demand for chocolate in the UK was further damaged by the summer heatwave and Cadbury scrapped its profits margin target in October as rising raw material costs also took their toll.

Today the company reiterated its October guidance that margins will be flat and revenues will grow in the middle of its 3% to 5% target range.

It also reported a “significant and deliberate” overstatement of the financial position of its 50%-owned subsidiary Cadbury Nigeria.

Cadbury said it expected its Nigeria arm to report operating losses of between £5m €7.4m) and £10m (€14.8m) this year and pay a one-off charge of £55m (€81.5m) to £60m (€88.9m) for the overstatement.

Cadbury chief executive Todd Stitzer said: “2006 has been a challenging year for Cadbury Schweppes with very strong performances across large parts of our business partly offset by events in the UK and Nigeria.

“Although these have taken the edge off another year of strategic and operating progress for the group, our performance in 2006 will be in line with previous guidance.

“As we move forward into 2007, we believe that the fundamentals of our business remain strong.”

Mr Stitzer said profits at its business in Europe, Middle East and Africa “will be impacted by challenging trading in the UK”.

But he added: “The UK market is improving and the important pre-Christmas selling season is progressing satisfactorily.”

Mr Stitzer pointed to strong demand for its new chocolates, Cadbury Melts and Flake Dark. He also said Trident Splash and Trident Soft chewing gum will go on sale in the UK at the end of January.

In its Americas region, Cadbury said sales of soft drinks were driven by good performances for Dr Pepper, 7 Up and Sunkist.

The company added that the confectionery business in the Americas had “an excellent year”.

Cadbury shares were unchanged at 535p today, leaving it down nearly 3% on the year so far.