Cadbury's feels the heat after summer temperatures melt confectionery sales

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The Independent Online

Cadbury Schweppes unsettled investors yesterday by warning that the summer sunshine had put people off eating chocolate, hitting the group's European confectionery sales.

The company, which is struggling to bed down its recent £2.7bn purchase of Adams, added that its drinks division - home to Dr Pepper, 7 Up and Snapple - was still suffering from a "weak" US beverage market.

However, Cadbury softened the blow by saying the sales shortfall would not affect its profitability during the rest of the year. It said its overall trading performance for the full year would be "broadly similar" to that seen in its first half. The reassurance helped the group's shares to claw back early losses, and they closed just 6.5p down at 381.25p.

Cadbury's alert was the latest in a long line from companies hurt by August's record temperatures and, more recently, September's Indian summer. The specialist chocolate maker Thorntons issued a profit warning after the sunshine melted its sales, while other retailers from Greggs, the baker, to John Lewis, the department store group, have been affected by the warm weather.

Cadbury, which is expected to announce a major cost-cutting offensive in October, issued the trading update as it confirmed that its plans to refinance a substantial chunk of its $6.1bn debt pile were on track. The company, which geared up to buy Adams, has issued £400m of bonds so far this year and is expected to issue a minimum of $1bn more, possibly as early as next week. It has promised to refinance at least $1.6bn during 2003 but the eventual sum will depend on "market demand", sources close to the company said.

Analysts were largely unperturbed about Cadbury's trading news, which reiterates guidance released less than two months ago. "It's a storm in a teacup," one consumer goods analyst said. "The summer is not a great selling period for them anyway," he added, pointing out that the company makes the bulk of its second-half profits in its fourth quarter.

Todd Stitzer, who took over as chief executive earlier this year, has already warned the City that 2003 would be a tough, transitional year for the company. As well as integrating Adams, which owns brands such as Hall throat sweets and Dentyne chewing gum, it is restructuring its US drinks operations. Meanwhile, two earlier acquisitions, of Orangina-Pampryl, the French drinks business, and Dandy, the Danish Stimorol gum maker, are proving problematic.

The US beverages market has suffered from changing consumer tastes, as health-conscience shoppers opt for diet drinks.