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Kraft Profit More Than Triples, Expects Strong Growth

Tuesday, 16 Feb 2010 07:34 AM

Kraft Foods Inc. said Tuesday its fourth-quarter profit more than tripled on strength in developing markets and continued benefits from its restructuring plan to focus more on its money-making products.

The food maker, which is buying British candy maker Cadbury, said it expects long-term earnings growth at the high end of its previous guidance.

Kraft, whose brands include Maxwell House, Oreo cookies and its namesake cheese, said profit surged to $710 million, or 48 cents per share, for the period ended Dec. 31. That's up from $178 million, or 12 cents per share, a year ago.

Analysts expected a smaller profit of 45 cents per share, according to Thomson Reuters.

Sales rose 3 percent to $11 billion, but missed Wall Street's $11.07 billion estimate.

The company, based in Northfield, Ill., continued to struggle in the U.S. in the fourth quarter.

Shoppers are increasingly buying food from grocery stores rather than restaurants during the recession, but they're trading down to less expensive, store-label brands. That forces Kraft and other food makers to compete for market share by promoting brands and cutting prices.

Revenue in the company's U.S. beverage business fell 1.9 percent as Kraft saw weakness in its Maxwell House and Starbucks coffee brands, which could not offset growth in Capri Sun and Crystal Light.

The U.S. cheese business' revenue fell 13.7 percent, largely on lower prices.

The company matches its dairy prices to market costs, and those have been falling.

The U.S. snacks business, which includes Ritz crackers and Oreos, saw its revenue fall 2.8 percent on weakness in cookies and crackers. Snack nuts revenue fell because of steep price competition.

A standout in the U.S. business was convenient meals, which includes frozen pizzas such as Tombstone and other foods people eat as meals at home.

Revenue there rose 3.9 percent, with Oscar Mayer Deli Fresh meats and pizza posting double-digit growth.

With the U.S. business stagnant, the company is looking for growth overseas. Revenue in developing markets grew 10.4 percent. Both Latin America and Asia Pacific had double-digit revenue growth, with strength in brands such as Tang and Philadelphia cream cheese.

For fiscal 2009, the company earned $3 billion, or $2.03 a share, up from $2.89 billion, or $1.90 a share, the year before. Revenue fell 3.7 percent to $40.39 billion.

The effects of currency exchange caused the revenue decline, the company said. Foreign sales convert back to fewer U.S. dollars when the dollar is strong.

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Kraft Foods Inc. said Tuesday its fourth-quarter profit more than tripled on strength in developing markets and continued benefits from its restructuring plan to focus more on its money-making products.The food maker, which is buying British candy maker Cadbury, said it...
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