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Cadbury Schweppes profits up 15% - Views on News from Equitymaster
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  • Feb 15, 2001

    Cadbury Schweppes profits up 15%

    Cadbury Schweppes, parent of Cadbury India has recorded a 15% jump in net profits for the year ended December '00 on revenues of Rs 311 bn. Remarkably, the company's operating margins improved sharply by 100 basis points to 18.4%.

    (Rs m) FY00 FY01 Change
    Sales 292,210 310,826 6.4%
    Operating Profit (EBDIT) 50,751 57,138 12.6%
    Operating Profit Margin (%) 17.4% 18.4%  
    Profit before Tax 46,607 53,808 15.5%
    Profit after Tax/(Loss) 32,829 37,753 15.0%
    Net profit margin (%) 11.2% 12.1%  
    Diluted Earnings per share 15.3 17.5  
    P/E (at current price)   15.0  
    Market Cap/Sales   2.1  

    The outstanding performance was led by its two leading brands Dr Pepper and Seven Up. Profits from beverages segment was up by 36% in Europe and 14% in the US. However, combined volumes of these two brands grew by a marginal 1%. Intense competitive pricing and marketing activity in December affected volume growth of the brands. Its advertisement to sales ratio rose by 130 basis points to 19.4% during the year. Beverages business contributes nearly 50% of its total revenues.

    The company's operating profit was driven by its managing for value program which focuses on enhancing shareholder return through operating efficiencies.

    Apart from the organic growth, Cadbury (S) has also strengthened its business through significant acquisitions. In the US, the company acquired brands in beverages segment such as Snapple, Mauna Lai and Slush Puppie. In Australia it included the Lion Nathan soft drinks operations and Spring Valley. In France the company acquired the largest confectionery brand Hollywood. It also purchased confectionery brands in China and Argentina.

    The company is likely to face challenging conditions in the first quarter of the current year with a slow down in the US economy. To de-risk its business the company is expanding its brands in Europe and emerging markets which are less exposed to a downturn.

    Currently Cadbury Schweppes trades at a P/E multiple of 15 times its December '00 earnings with a market cap to sales ratio of 2 times. In the domestic market Cadbury India is trading at a P/E of 33 times with a market cap to sales ratio of 3 times.



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