Cadbury sees 2006 soured by UK and Nigeria

LONDON, Dec 12 (Reuters) The world's largest confectionery group, Cadbury Schweppes Plc, warned its performance in 2006 will be soured by a British salmonella scare and a Nigerian accounting scandal but said trading was still in line with its guidance.

The maker of Dairy Milk chocolate, Trident gum and Dr Pepper drink raised the cost of dealing with this summer's salmonella contamination, while its Nigerian business will slide into a loss and take a one-off charge against overstated figures.

''Clearly, this has been a challenging year with a difficult time in the UK and developments in Nigeria extremely disappointing,'' said Chief Executive Todd Stitzer in a conference call after an end-of-year trading statement.

The group reiterated its October update by saying it saw 2006 underlying revenue growth in the middle of its 3 to 5 percent target range and flat operating margin -- when stripping out Nigeria -- due to its British salmonella-related product recall and hot summer weather hitting chocolate sales.

Analysts said the group was performing strongly in most of the world with its problems confined to Britain and Nigeria.

Cadbury shares were steady at 535 pence by 0845 GMT. They have recovered from a low of 492-1/2p in June, but have still underperformed the DJ Stoxx Food and Beverage Index by 12 percent this year due to poor European trading in the first quarter and its salmonella scare.

In late June, Cadbury started recalling more than a million chocolate bars in Britain and Ireland because of minute traces of salmonella in a number of its products, and it has now increased the cost of this recall by 50 percent to 30 million pounds from 20 million pounds as previously estimated.

Stitzer added the UK confectionery market was improving in the period up to Christmas and Cadbury's share of the overall British market - at 31 percent in sweets and 35 percent in chocolate - were similar to last year's levels.

In Nigeria, Stitzer said the group had found ''significant and deliberate'' irregularities since Cadbury insisted on putting its own finance person into Nigeria when its shareholding in the Nigerian business rose above 50 percent in the summer.

Cadbury said the chief executive and finance director of its 50.02 percent-owned West African subsidiary had now left the company and a full inquiry had been launched into the overstatement of figures over the last three years.

Cadbury warned its Nigerian business will report a 2006 operating loss of 5 to 10 million pounds after a 20 million pound operating profit in 2005, and Cadbury's share of the one-time right off will be 20 to 25 million pounds.

The London-based group pointed out that Nigeria only accounted for around one percent of overall profits in 2005.

In addition, Cadbury said it will spend an initial 10 million pounds behind the launch of Trident Splash and Trident Soft in the British chewing gum market at the end of January to compete with the world's top gum group Wm. Wrigley Jr. Co., which has 98 percent of the UK market.

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