Salmonella costs higher than forecast for Cadbury

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The Independent Online

Cadbury Schweppes yesterday revealed that the cost of the summer salmonella scare was 50 per cent higher than it had initially forecast.

Cadbury's sales in the UK suffered as a result of the hot weather over the summer, but more significantly from its recall of a million chocolate bars after traces of salmonella were discovered in some of its products.

The company said that the £30m cost of the recall and cleaning up its factories and installing new systems to avoid future contamination was much higher than it had initially expected.

Cadbury's UK issues combined with an accounting scandal in Nigeria to take the shine off a solid performance during 2006. The company expects revenue growth for the year to be between 3 and 5 per cent.

Todd Stitzer, the chief executive of the confectionery and soft drinks company said: "Clearly this has been a challenging year with a difficult time in the UK and developments in Nigeria extremely disappointing."

Cadbury said there had been signs of improvement in the UK chocolate and confectionery market heading into the crucial Christmas period and that the company is maintaining its market share.

Cadbury has launched a series of new chocolate products in the run-up to Christmas and is re-entering the UK chewing gum market with the launch of Trident Soft and Trident Splash in January. It is confident it can compete with Wrigley - despite its rival commanding a 98 per cent market share in the UK - and will initially spend £10m marketing the gum.

The company has also taken steps to address what it described as "significant and deliberate" accounting irregularities in its Nigerian accounts and will conduct a review of the division's books from the past three years. The chief executive and finance director of the Nigerian unit have since left the company.

Cadbury will book a one-off charge of up to £25m related to the situation and said the division will record an operating loss of up to £10m in 2006.

The company also warned that the decline in the value of the dollar against sterling could affect its earnings next year. It owns popular American soda brands, including 7 Up, Dr Pepper and Sunkist, and derives a large portion of its revenue from North America.

Shares in Cadbury closed up 7.5p at 542.5p, as analysts said the costs were in line with expectations.