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Key drivers for a financial projection of Cadbury
• ex. sugar-free products). Cadbury has launched a new line of products to catch up on this trend called “better-for-you”. They hope this will allow them to gain market share. Their ambition is to become the biggest confectionary company globally. • (ex. mature vs growth markets) Based on Iryna’s analysis, the confectionary industry has been growing steadily in the 3-5% range and emerging markets had even double digit growth rates. Mature markets are expected to grow with a 3% rate and EM with 5% to 10% depending on the source. Cadbury is very well present in EM, which will help them to benefit from that growth through the strength and breadth of their market positions, across different geographies and categories.
Revenue and growth assumptions
To forecast other elements of the IS, BS and CF statements, I looked and historical trends and used information from annual report to decided how to estimate the future values of those elements.
The projections shows that Cadbury will further increase its net income based on the assumptions used, but the cash flow is negative at the end of each year. This comes mainly from the payback of debt and the zeroing out of any future acquisition and discontinuation of operations. We see the importance for Cadbury to have consistent high levels of debt to finance their operations (in line with the debt to equity ratio and liquidity ratio discussed in financial analysis).This is part of their financing strategy and the Dupont ROE shows well how ROE is improved mainly through leveraging.
Concerns and uncertainties regarding the projection
The main concern in the projection comes from the high fluctuations in Cadbury activities in investing in intangible assets and discontinuing operations. These movements have a high impact on their financial...