Cadbury Schweppes shareholders are to get no special dividend or capital repayment when the American soft drinks operation is de-merged in the early summer to become an independent company listed on Wall Street under the name Dr Pepper Snapple.
Disappointment at this news yesterday sent the shares sharply lower to finish 33p down at 579p yesterday , although Todd Stitzer, Cadbury's chief executive, said that a stronger balance sheet would mean better returns from the US shares.
Cadbury originally intended to sell the US operation outright, but had to drop the plan when would-be buyers could not raise the funds in the credit crunch. Cadbury then switched to a demerger plan whereby shareholders would receive shares in both companies plus some cash to be raised by issuing debt against the American company.
But yesterday Ken Hanna, finance director, said the debt market had worsened in recent weeks, so that it is now clear that it would be uneconomic to raise extra sub-investment grade debt for this purpose. All the $4 billion to be raised for the US company, now being negotiated with five banks, will rank as investment grade.
"In the light of current turbulent conditions in the debt markets, particularly the cost and availability of sub-investment grade debt, it has become clear that both companies can only be financed economically by implementing investment grade capital structures," Mr Stitzer stated.
"On this basis, there will be no capital return to share-owners on de-merger."
Half the present Cadbury Schweppes debt of £3.2 billion will be paid off, because it cannot be used to finance a wholly US company, and replaced by the new borrowing. The other half will remain with the confectionery company, Cadbury.
Mr Stitzer was presenting full-year results showing profits of £670 million for 2007, down from £738 million the year before.
Not counting restructuring and other one-off costs, the underlying profit was £1.05 billion, against £1.07 billion last time. At constant currencies there was a four per cent improvement on sales 11 per cent higher at £7.97 billion.
"Foreign exchanges reduced our profit by £61 million," Mr Stitzer said.
He added that 2007 had been an "excellent" year for confectionery and a "good" one in challenging market for the US beverages.
Fast rising commodity prices would make 20008 a tough year, Mr Stitzer said. Cadbury was responding with "robust"' moves to raise its prices and extend it margins.
A seven per cent grow in confectionery revenues last year was the best for a decade, he said.
Gum brands such as Trident and emerging markets - notably Russia, Nigeria and China - drove the improvement with double-digit growth.
Revenues from Cadbury Dairy Milk were up five per cent, with good results in the UK and strong growth in emerging markets.
This year, Cadbury expects its confectionery revenues to grow towards the upper end of its four to six per cent target range.
It said its is also making progress on cost a cost-cutting drive announced last June involving the loss of 7,800 jobs and the closure of 15 per cent of its factories worldwide, including Somerton near Bristol, where 500 jobs will go.
Margins were lower in UK confectionery, due to the cost of a marketing drive for Dairy Milk, the launch of chewing gum brands and higher milk costs.
"As previously indicated, commodity input costs are expected to be five to six per cent higher in 2008 and we will seek to offset these increases through price rises," the company stated.