London, Oct 21 - Britain's Cadbury beat sales forecasts and raised targets in a bumper third-quarter trading report, surprising investors and pressuring suitor Kraft to come up with a much bigger bid to win its takeover battle.
The London-based confectionery group said on Wednesday underlying sales rose 7 percent in the July-September quarter, beating even the most bullish forecasts, and unexpectedly increased both its sales and margin growth targets for 2009.
Cadbury said it expected 2009 sales growth of around 5 percent, up from 4 percent previously, and its operating margin percentage to jump 135 basis points rather than its old target of 80-100 basis points.
Analysts expect shares in the Dairy Milk chocolate and Trident gum maker to open higher, which would force Kraft to consider making a knockout bid to win over the world's second largest confectionery group.
Cadbury has repeatedly rejected Kraft's 10.2 billion pound cash and shares proposal made in early September, and the UK Takeover Panel has given Kraft a deadline of Nov. 9 to come up with a firm bid or walk away for six months.
Most analysts had expected Cadbury to report 4 percent third-quarter sales growth and hold its 2009 sales target at the lower end of its 4-6 percent medium-term range and either hold or slightly nudge up its annual margin target.
"We have great momentum in our business and our confectionery strategy continues to yield benefits beyond expectations. In the third quarter we have delivered growth in every category and every business," said Cadbury Chief Executive Todd Stitzer in the third-quarter trading update.
Kraft's takeover proposal of 40 percent cash and the rest in new Kraft shares valued Cadbury shares initially at 745 pence or 10.2 billion pounds ($16.8 billion), but the fall in Kraft shares makes it currently worth 729 pence against a Cadbury close on Tuesday of 798-1/2p
Analysts believe Kraft will wait until after its own third-quarter earnings on Nov. 3 before raising its bid with many looking for a bid of at least 850 pence, including half in cash, to win the backing of Cadbury's board and not turn to a hostile bid.