Tax settlement on Cadbury’s deal hands Kraft subsidiary $58m Q1 boost
The settlement of a pre-acquisition tax matter in regard to its takeover of Birmingham confectioner Cadbury’s, has handled parent organisation Mondelez International a $58m boost to its first quarter.
Mondelez parent Kraft Foods originally acquired Cadbury’s in 2010 in a deal which valued the business at more than £11bn.
As part of the company’s acquisition, Kraft became the responsible party for tax matters under a tax indemnity agreement signed on February 2, 2006 between the then Cadbury Schweppes plc and its related entities and Black Lion Beverages and related entities.
The tax matters included an ongoing transfer pricing case with the Spanish tax authorities related to the Schweppes businesses Cadbury divested prior to the company’s acquisition of Cadbury. During Q1 2017, the Spanish Supreme Court decided the case in the company’s favour. As a result of the final ruling, during Q1, Mondelez – now toe owner of Cadbury’s – recorded a favourable earnings impact of $46m in selling, general and administrative expenses and $12m in interest and other expense, net, for a total pre-tax impact of $58m.
The confectioner’s products also helped to boost profits during the three-month period.
Overall, Mondelez reported higher-than-expected profit and sales during Q1. It was helped by cost cutting and strong sales of its Cadbury Dairy Milk and Milka chocolate brands.
Performance was especially strong in Latin America where net revenue, which accounts for about 14% of the group’s total sales, increased 11.4% compared with the same period last year.
Net sales from brands such as Cadbury Dairy Milk, Milka chocolate and Oreo cookies, rose 1.6% over the three-month period.
However, total revenue declined 0.6% to $6,414m (Q1 2016: $6,455m), largely due to lower growth in its North America biscuits division, Mondelez’s second-biggest market.
