Tags: US | Earns | Kraft | Foods

Kraft Trims Sales Views Despite Profit Rising 13 Percent

Friday, 06 Aug 2010 09:02 AM

Kraft Foods Inc.'s second-quarter net income grew 13.3 percent, but the nation's largest food maker said Thursday that it sold less food in North America and it trimmed its sales forecast in the face of rising competition.

The maker of Oreo cookies, Kraft cheese and other popular foods earned $937 million, or 53 cents per share, for the quarter ending June 30. That's up from $827 million, or 56 cents per share, a year earlier.

Kraft, which bought British confectioner Cadbury in February for $19.5 billion, had more shares outstanding in this year's second quarter.

Excluding one-time items, Kraft earned 60 cents per share in this year's second quarter. Analysts surveyed by Thomson Reuters, who typically exclude one-time items, expected earnings of 52 cents per share on revenue of $12.33 billion.

Kraft's shares rose $1.14 on the news, or 3.8 percent, to $30.80 in after-hours trading Thursday.

Its revenue rose 25.3 percent to $12.3 billion, with much of the gain from Cadbury's chocolates and candies.

Consumer product sales have fallen in developed markets like North America because shoppers are skimping on name brands to save money in the weak economy.

Kraft, based in Northfield, Ill., said that is still affecting its business. The company now expects its full-year organic net revenue to grow between 3 percent and 4 percent, down from an earlier forecast of at least 4 percent. The company maintained its guidance for 2010 operating earnings per share of at least $2.

CEO Irene Rosenfeld told investors the company lowered its sales forecast for this year because it found that Cadbury distributors had bigger inventories than it expected.

Kraft said its North American results were hurt by aggressive discounts and promotions by competitors in cheese, salad dressings and crackers. Rosenfeld said the company will fight its competitors for market share.

"We will not continue to tolerate share gains that are driven by aggressive promotional pricing," she said on a conference call. She said the company will spend more on promotions but that is already accounted for in its expectations for the rest of the year.

Revenue in North America — its biggest segment — rose 6.3 percent to $6.16 billion, although the amount and mix of products it sold fell 2 percent. Key brands such as Oscar Mayer bacon, Philadelphia cream cheese and Kool-Aid and Capri Sun posted gains. But the amount and mix of cheese the company sold fell 11.8 percent for the quarter. It fell 6.2 percent for grocery and 3.5 percent for snacks.

In Europe, Kraft's revenue rose 34.1 percent to $2.79 billion, the bulk of that coming from Cadbury. The amount of products it sold and how much it got for them rose 7.9 percent, but price cuts lowered that figure. Higher sales of chocolate and cheese helped offset lower prices. Weaker markets were Spain and Greece, while France and Britain had solid growth.

Developing-markets revenue rose 73.4 percent, again mostly from Cadbury, with total revenue reaching $3.3 billion. The amount and mix of the products it sold rose 8.7 percent, with strong performance from Latin America and China, Australia and the Philippines.

The Cadbury acquisition enabled Kraft to expand into new categories and new countries. The company now expects savings of at least $750 million in savings from the deal, more than its earlier estimate of $675 million.

But it expects to spend more integrating Cadbury's operations, some $1.5 billion, up from an earlier estimate of $1.3 billion.

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Kraft Foods Inc.'s second-quarter net income grew 13.3 percent, but the nation's largest food maker said Thursday that it sold less food in North America and it trimmed its sales forecast in the face of rising competition.The maker of Oreo cookies, Kraft cheese and other...
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2010-02-06
Friday, 06 Aug 2010 09:02 AM
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