Cadbury Schweppes shrugged off the #30 million cost of last year's salmonella scare to serve up a nine per cent rise in profits for 2006.
But the fact that the result was at the lower end of City expectations plus a warning of higher marketing and commodity costs put the world's biggest confectionery and soft drinks producer's shares under pressure.
The stock closed yesterday 12.5p or two per cent down at 564p.
The company, which owns brands such as Dairy Milk chocolate and Dr Pepper, said underlying pre-tax profits stood at #931 million last year.
Its performance was hit by the multi-million pound product recall last June when Cadbury was forced to take more than a million chocolate bars off the shelves following a salmonella outbreak.
Profits were were slightly below the analyst consensus, which had been pegged at about #954 million, and underlying operating margins fell by 150 basis points to 14.4 per cent in 2006.
Cadbury’s confectionery arm based at Bournville in Birmingham saw like-for-like revenues growth slow to four per cent from six per cent a year earlier due to difficult trading in the UK.
The group said it maintained its share of the confectionery market at 31 per cent and chocolate at 34 per cent, "despite the poor third quarter which was impacted by the combination of the hot summer and a product recall".
The group’s full-year results also revealed the full cost of a "financial overstatement" in the group’s Nigerian business.
Cadbury reported a #15 million impact from the accounting fraud at its Nigerian operation, which was first discovered last November more than six months after Cadbury increased its stake in the operation from 46 per cent to just over 50 per cent.
The group recorded #133 million in restructuring charges last year from its "fuel for growth" programme – an ongoing shake-up launched more than two years ago to save some #400 million through trimming its number of factories world-wide and reducing its workforce.
After taking exceptional charges into account, profits fell by 12 per cent to #738 million.
Drinks revenues for the group were up by four per cent on a like-for-like basis and Cadbury said its chewing gum business was "outstanding" with a ten per cent revenues surge.
Cadbury launched the US Trident brand in the UK this month, sparking a so-called chewing gum war with market leader Wrigley – a move which the group hopes will spur growth in the business over the year ahead.
Chief executive Todd Stitzer said: "We start 2007 with optimism and are continuing to invest behind growth, with a strong innovation pipeline including the launch of Trident, our global gum brand, into the UK."
Cadbury Schweppes is awaiting the results of an investigation into possible breaches of food safety rules at its Marlbrook plant – the factory at the centre of last year’s salmonella scare – which could see it face legal action.
And product problems continued into this year when the group was recently forced to recall a number of its Easter egg lines which failed to carry the correct nut allergy labelling.
Citigroup analyst Warren Ackerman said the #2.2 billion take-over of US group Adams in 2002 had given the group a "powerful" position in chewing gum with the Trident and Dentyne brands and medicated sweets market, via the Halls offering.
The group sold off its drinks operations in Europe, Syria and South Africa last year to focus on what it says are "more advantaged markets", such as North America, Mexico and Australia.
