Kraft's profit edges up on price hikes
Thursday, May 3, 2012
NEW YORK (AP) — Kraft Foods Inc. said Thursday that the growing popularity of its cookies and chocolates in developing markets -- and the higher prices it charged around the world -- helped its profit edge up in the first quarter.
The parent company of Nabisco, Velveeta, Miracle Whip and other brands says it earned $813 million, or 46 cents per share, in the first three months of the year. That's up 1.8 percent from $799 million, or 45 cents per share, a year earlier.
Excluding one-time items such as restructuring costs, the company earned 57 cents per share. That was a penny more than analysts expected, according to FactSet.
Its net revenue for the quarter rose 4 percent 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 percent; of that increase, 5.5 percent came from higher prices and 1 percent from improved volume and mix of products.
Rising costs for ingredients dragged down Kraft's gross profit margin to 35.6 percent, from 36.9 percent. But selling, general and administrative expenses declined, by 4 percent to $2.82 billion for the quarter.
Kraft Foods is preparing to split into two publicly traded companies this year. One is set to be called Mondelez and focus on 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's on track to complete the split by the end of the year.
In North America, the company said its net revenue rose 1.3 percent with help from price increases and the timing of Easter. Net revenue from Europe rose 4.5 percent, while net revenue from developing markets rose 8.5 percent 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 percent, while global biscuits revenue was up 8 percent, helped by the rapidly growing popularity of Oreo cookies in China.
One disappointment was the global gum and candy unit that includes Trident, where revenue rose only 1 percent. CEO Irene Rosenfeld cited broader economic conditions in Europe.
"We remain confident that gum will remain a significant contributor to our long-term growth," she said.
Kraft, which is based in Northfield, Ill., stood by its forecast for at least a 9 percent 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.
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