DBRS Confirms Ratings for Cadbury Schweppes plc, Changes Trends to Positive

Dominion Bond Rating Service (DBRS) has changed the trends of Cadbury Schweppes plc (Cadbury, or the Company) to Positive from Stable and has confirmed the ratings as BBB and R-2 (high).

In February 2006, Cadbury completed the anticipated sale of its low-growth and underperforming European Beverages business for net proceeds of £1,150 million. The Company used approximately £600 million of these proceeds to acquire the remaining 55% stake in its Dr Pepper/Seven Up Bottling Group in May 2006. These transactions follow Cadbury’s previously stated strategy to divest of non-core businesses and focus on investing in developing markets and the U.S. bottler network in an attempt to strengthen the route to the largest market in the world, leverage scale, and achieve higher growth and profitability. We believe the successful sale of European Beverages and the strategic and prudent investment in U.S. bottling will be positive for Cadbury’s earnings profile going forward.

In addition, Cadbury has displayed impressive growth in organic revenue, driven by strong brand equity, product innovation and excellent performance in confectionery and key developing markets. This growth is expected to continue. The Company has shown improvement in product mix and continues to generate significant efficiency improvements and savings from its four-year restructuring/rationalization program and successful integration of Adams, which has offset the impact from the rising cost of inputs. As such, Cadbury has displayed good improvement in free cash flow generation from continuing operations, resulting from higher earnings, and relatively stable capex and dividends.

Since the acquisition of Adams in 2003, Cadbury has used the majority of its free cash flow for debt reduction. This strategy has improved cash flow/net debt to 28% for LTM to June 30, 2006, from 19% in 2003, and reduced net debt/capital to 52% at June 30, 2006, from 62% at the end of 2003. Free cash flow should display another round of considerable growth by 2007 as the effect of recent and planned divestitures and acquisitions take hold. DBRS anticipates that the financial profile will continue to strengthen, as the Company is expected to use the majority of free cash flow to repay debt or effectively reduce net debt over 2006 and 2007.

Note:
All figures are in British pounds unless otherwise noted.