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Domino's Pizza to Meet Target Despite Rising Costs

Domino's Pizza's chief executive, who will become executive chairman next year, said Thursday's trading update "is definitely not the precursor to a profit warning" despite pressure from soaring cheese costs.

Shares in Domino's were down 6 percent because the firm will take a hit of around 0.5 million pounds ($1.04 million) to pretax profit this year.

Analysts had previously given a consensus forecast of around 17.5 million pounds in 2007, Chief Executive Stephen Hemsley said.

Domino's is still comfortable with that consensus, Hemsley said, because it expects to "murder" the city's forecasts for sales in the second half.

Booming demand for dairy products in Asia coupled with droughts in Australia and summer floods in Europe have combined to send up the price of mozzarella, which accounts for up to 75 percent of the cost of making a pizza.

"Like-for-like sales are going like a train," said Hemsley by phone. "The Rugby World Cup was a lot more helpful than we had expected."

The company posted like-for-like sales up 14.2 percent on the year before in the third quarter to bring the 39-week figure to 14.6 percent. Analysts had previously been expecting like-for-like sales growth of 6 percent in the second half overall, Hemsley said.

Domino's said from the start of 2008, Chairman Colin Halpern would retire and become Non-Executive Vice Chairman. Chief Executive Stephen Hemsley would become Executive Chairman and Deputy Chief Executive Chris Moore would become chief executive.

Shares in Domino's were down 6.1 percent by 0945 GMT, valuing it around 367 million pounds.