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Nelson Pelz raises Cadbury stake

Created:
11 December 2007
Written by:
Nathalie Olof-Ors

Cadbury Schweppes raised its revenue and margin guidance for 2007 after a strong performance in chocolate in the UK and strong growth in US gum. Chief executive Todd Stitzer now expects like-for like revenues to grow over his 4 to 6 per cent target.

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The group said that the chocolate business is showing signs of recovery following a successful advertising campaign - featuring a drum-playing gorilla - as well as the re-launch of products such as Wispa.

Cadbury added that the demerger of its US beverages business - renamed Dr Pepper Snapple Group Inc - remains on track.

The group has also confirmed that Nelson Pelz has increased its stake in the company from 3.47 per cent to 4.5 per cent. The American activist shareholder is rumoured to have teamed up with the Qatari Investment Authorities to put pressure on the company.

Tip update

Sell

Nelson Pelz's moves have triggered dramatic ups and downs in Cadbury's share price this year. So this new wave of activity from the corporate raider could support the share price in the short term, but is likely to exacerbate the shares' volatility. Although the price has bounced back by 9 per cent since our Sell tip (575p, 21 Sep 2007), Cadbury remains a risky investment. Sell, at 631p.

Last IC View: Sell, 615p, 10 Oct 2007

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