Cadbury profit puts pressure on Kraft

London: Cadbury beat sales forecasts and raised targets in a bumper third-quarter trading report, pushing up its shares and pressuring suitor Kraft to come up with a bigger bid to win its takeover battle.

The London-based confectionery group said yesterday underlying sales rose seven per cent in the July-September quarter, beating even the most bullish forecasts, and unexpectedly increased both its sales and margin growth targets for 2009. Cadbury shares initially rose 1.2 per cent to 808.95 pence (Dh4.85), the highest since its 2008 soft drinks demerger, and well above Kraft's current cash and share offer worth 726 pence.

Barely changed

But they drifted back to stand barely changed at a fraction below 800 pence by 1135 GMT on concern the margin improvements were helped by lower marketing spend and the view that without a competing bid for Cadbury, Kraft was unlikely to raise its bid. "Why would Kraft bid against themselves? Cadbury shareholders will have to balance the hope of a higher bid against Kraft walking away," said one analyst.

A Kraft spokesman declined to comment on the update while in Frankfurt Kraft was up 0.5 per cent at 18.31 euros.

Analysts pushed their forecasts for a successful bid by Kraft for the world's second largest confectionery group towards the top end of their previous 850-900 pence range, with some believing a white knight bidder may still emerge.

"We think this statement, plus confidence expressed about 2010 and 2011, significantly reduced the chance of Cadbury being acquired on the cheap and as such we raise our target price from 860p to 900p," said Graham Jones at brokers Panmure Gordon.