Cadbury Schweppes, the world's biggest confectionary maker, has reported a slide in half-year profits due to higher costs and said it is prepared to demerge its North American soft drinks business if the proposed £7 billion sale is quashed by turmoil in US credit markets.
It said underlying profits before tax were down by 6% to £180m in the first half. Including exceptional restructuring costs, pre-tax profits fell 34% to £69m.
Group revenue rose 1.3% to £2.326 billion.
'We expect continued good revenue growth in the second half, while margins will be impacted by the combination of growth investment and higher input costs,' Cadbury Schweppes chief executive Todd Stitzer said.
The group said it was ready to split off its US drinks unit, Americas Beverages.
'Should debt market conditions not stabilise sufficiently, we are now fully prepared to pursue a de-merger process,' Cadbury Schweppes said.
Under a 'de-merger', Americas Beverages would be listed as a separate company, with its shares retained by Cadbury Schweppes shareholders.
Last week Cadbury extended its timetable for the sale of Americas Beverages owing to the recent 'extreme volatility' in debt markets.
The maker of Schweppes, Dr Pepper and 7-Up soft drinks issued a statement last Friday amid analysts' concerns that the troubled US housing market will hurt banks and finance companies enough to curb the availability of credit on which the economy feeds.
In turn, that could affect private equity groups bidding for Americas Beverages since their offers are often financed by large amounts of bank debt.
Two private equity consortiums are understood to be in the running for the business - one comprising Bain Capital Partners, Thomas H Lee Partners and Texas Pacific Group. The other is made up of Blackstone, Kohlberg Kravis Roberts and Lion Capital.
Cadbury Schweppes revealed a fresh round of cost-cutting last month, with 7,500 jobs to go, in an effort to improve profit margins.
At the time Cadbury Schweppes said that the plan to cut its global workforce by 15% will result in no further job losses for its operation in Dublin.
Last October the company said it would cut 450 positions over the next two to three years at its plant in Coolock, where it employs 1,100.
