Kraft’s profit edges up on higher prices

AAP
May 04, 2012

KRAFT Foods Inc says the growing popularity of its products in developing markets – and the higher prices it charges around the world – have helped its profit edge up in the first quarter.

The parent company of Vegemite, Cadbury, Oreo and other household brands says it earned $US813 million ($A790 million), or 46 cents per share, in the first three months of the year. That’s up 1.8 per cent from $799 million, or 45 cents a share, a year earlier.

Excluding one-time items such as restructuring costs, the company earned 57 cents a share. That was a penny more than analysts expected, according to FactSet.

Its net revenue for the quarter rose four per cent to $13.1 billion, from $12.57 billion a year ago. Organic revenue, which excludes the impact of currency fluctuations and divestitures, rose 6.5 per cent; of that increase, 5.5 per cent came from higher prices and one per cent from improved volume and mix of products.

Rising costs for ingredients dragged down Kraft’s gross profit margin to 35.6 per cent, from 36.9 per cent. But selling, general and administrative expenses declined, by four per cent to $2.82 billion for the quarter.

Kraft Foods is preparing to split into two publicly traded companies this year. One will be called Mondelez and focus on its international snack brands such as Cadbury.

The other will retain the Kraft name and concentrate on its North American grocery business, which includes Oscar Mayer meats.
The company said it is on track to complete the split by the end of the year.

In North America, the company said its net revenue rose 1.3 per cent with help from price increases and the timing of Easter. Net revenue from Europe rose 4.5 per cent, while net revenue from developing markets rose 8.5 per cent as a result of both higher pricing and increased volume.

In its international snacks business, the company said its global chocolate revenue was up 10 per cent, while global biscuits revenue was up eight per cent, helped by the rapidly growing popularity of Oreo cookies in China.

Kraft stood by its forecast for at least a nine per cent rise in operating earnings per share for the full year.

Shares of Kraft slipped 43 cents to $39.16 after hours. The stock had lost 11 cents in regular trading but remained close to its 52-week high of $39.99. The shares have traded as low as $31.88 the past year.