Cadbury, the world's biggest confectionery maker, reported a drop in first-half profitability today amid rising dairy prices and said the sale of its North American soft drinks business was still in the balance.
Shares in the maker of Dairy Milk chocolate and Trident gum fell as much as 8 per cent in early trading today.
Cadbury said last week it was postponing the sale of its North American soft drinks business, whose brands include Dr Pepper, 7UP and Snapple, because of turbulent debt markets.
The firm said that a sale was still its preferred option and that interest from potential buyers remained strong, but that it was also now "fully prepared" to demerge the business if debt market conditions do not improve.
Cadbury unveiled plans in March to split in two and focus on confectionery and said last month it would axe 7,500 jobs as part of a cost-cutting drive to lift profit margins towards those of its US confectionary rivals.
The firm declined to say how long it would wait before pursuing a demerger of its North American drinks unit, but analysts said hopes were fading the business would fetch initial estimates of as high as £8 billion.
Cadbury said margins were hit by heavy investment behind its entry into the UK chewing gum market, as well as a recent rise of about 20 per cent in the cost of dairy products.
Chief Financial Officer Ken Hanna said rising dairy prices could add £30-40 million of costs this financial year, but that Cadbury was suffering less than rivals that use milk powder, whose price has risen about 50 per cent in recent weeks.
Chief Executive Todd Stitzer told reporters that Cadbury's investment drive was bearing fruit and said its confidence in the future was underlined by a 22 per cent rise in the interim dividend to 5 pence a share.
But he also said margins were unlikely to improve in the second half of the year and the firm, which recalled more than 1 million chocolate bars in the UK and Ireland last year after a salmonella health scare, said its total share of the UK confectionery market fell 120 basis points.
Cadbury said underlying operating profit fell 6 per cent to £180 million in the six months to June 30 as a weaker US dollar offset a 6 per cent rise in revenues.