The announcement highlights the financial squeeze currently facing the largest confectionery company in the world. As well as poor profits from the US beverage arm in recent months, the company has faced pressure to increase margins by active shareholder Nelson Peltz. The company blamed the decision not to make the payout, first announced by the confectionery giant last summer, on the instability of the global debt markets. "In the light of current turbulent conditions in the debt markets, particularly the cost and availability of sub-investment grade debt, it has become clear that both companies can only be financed economically by implementing investment grade capital structures," the company said. "On this basis, there will be no capital return to shareowners on the demerger," the company added. Cadbury Schweppes first filed regulatory documents outlining the demerger of its Americas beverage business last November, as part of the company's strategy to focus on confectionery and snack products such as chocolate, chewing gum and biscuits. Cadbury's cautious move came as the company also reported a 2.1 per cent drop in operating profit for the year, ending 31 December 2007. Total net sales for the period rose 6.6 per cent to £7.97bn, but like many other food businesses the company faced a weak US dollar as well as high raw material costs for ingredients such as cocoa and milk. Still, chief executive officer Todd Stitzer described the year as 'excellent', praising tight cost controls and a good margin performance in the second half of the year. "Although the economic outlook for 2008 remains uncertain, we are encouraged by the good trading momentum we have seen in the new year and our continued progress on cost reduction initiatives," he said. Confectionery Over the course of 2007, net sales for Cadbury's food division went up 4.8 per cent to £5,093. Operating profit also increased to £497m, the company said. The company experienced strong growth across all markets, increasing 14 per cent in emerging markets. Previously underperforming operations in Russia, Nigeria and China 'improved significantly', although this was impacted by poorer sales in Australia, the company said. Sales of the company's most iconic brand - Dairy Milk - increased five per cent, attributed by Cadbury to strong growth in both the UK and emerging markets. According to Cadbury, the year's highlights included rolling out new gum technology in 23 markets across the Americas, Europe, Africa and Asia, and launching the organic range Green & Black's in Australia, Ireland and South African. In 2008, the company expects to increase revenues by up to six per cent for its food division. Commodity costs are also predicted to go up six per cent, but Cadbury said it is still aiming for mid-teens margin growth by 2011. Cadbury said it hopes to meet these expectations through price increases, as well as through the cost reduction programme first announced last summer. In June last year, announced its plans to close 15 per cent of its manufacturing sites around the world, and cut 15 per cent of its workforce. Cadbury also hopes to reconfigure its manufacturing footprint in Australia and New Zealand, and move its central offices from the current London address. Beverages Sales went up 12.2 per cent to £2.8bn for the beverages division, but operating profit fell 5.3 per cent, the company said. The company blamed the drop on the adverse impact of exchange rates as well as the unsuccessful launch of the sports drink Accelerade, which lost the company around £30m over the year. Consequently, margins also fell by 3.6 per cent to 19.2 per cent. "As the business prepares for demerger, we believe that the initiatives taken in recent years to invest in core brands, reduce costs and strengthen its route to market gives the business a strong platform for its future success as an independent company," Stitzer said.