DBRS Confirms Cadbury Schweppes plc, et al, at BBB

Dominion Bond Rating Service (“DBRS”) has today confirmed the ratings of Cadbury Schweppes plc (“Cadbury” or the “Company”) and related entities as indicated above at BBB & R-2 (high). The trends are Stable.

DBRS notes that the Company has displayed a modest trend of improvement in its earnings profile, driven by the gradual growth in organic revenue as well as the ongoing generation of cost savings from operations.

Despite markets in Continental Europe, particularly France, remaining weak, Cadbury has been achieving positive organic sales growth in all business groups, excluding Europe Beverages (“EB”), thanks to the strong brand equity of its products and good diversification.

Cost savings have been driven primarily by the Company’s Fuel for Growth (“FFG”) program, which to date has been successful in absorbing the fluctuating/rising cost of inputs and oil-related costs. However, while DBRS believes the gradual improvement in earnings and cash flow should continue, it will become more challenging for FFG savings to fully offset rising costs.

The Company’s balance sheet also continues to slowly improve, driven primarily by the use of cash flows to reduce net debt outstanding. An absence of large-scale acquisitions in the near term, as well as the stable nature of capital expenditures and dividend payments, should allow for further debt reduction in the near term and continued strengthening of the financial profile. Although meaningful debt reduction is anticipated, DBRS believes management’s goal of restoring credit metrics to pre-Adams acquisition levels by 2007 may be difficult to achieve if an environment of ongoing cost inflation and intensifying competition prevails.

Cadbury recently announced that it intends to initiate the sale of its EB business in the near future, in order to focus on confectionery and other beverage businesses for better growth and profitability. Should a sale result in a meaningful amount of after-tax proceeds being applied to debt reduction, credit metrics would improve accordingly.

Note:
The Issuer Rating has historically been called a Corporate Rating.
Issuer ratings apply to all general senior unsecured obligations of the issuer in question.
The ratings for Cadbury Schweppes US Finance LLC and Cadbury Beverage Canada Inc. are based on the guarantee of the parent, Cadbury Schweppes plc.