Kraft Foods' Q3 Operating Income Increases 38.7%
Published:03-November-2009
By Staff Reporter
Net revenue for the quarter declines
Food and beverage company, Kraft Foods has reported net revenue of $9.8 billion, a decline of 5.7%, for the third quarter of 2009. Operating income for the quarter is $1.41m, an increase of 38.7% compared to the prior year quarter.
Organic net revenues for beverages increased 1.5%, as higher price levels were partially offset by unfavorable volume/mix. The increase in net revenue was driven by solid growth in Capri Sun ready-to-drink beverages, Kool-Aid and Country Time powdered beverages and Starbucks and Maxwell House coffees.
Organic net revenues for cheese declined 10.3% as a 6.8 % point gain in volume/mix was more than offset by a 17.1% point reduction from lower price levels. This price decline was in response to lower dairy costs
Organic net revenues for convenient meals increased 5% as strong volume/mix gains were partially offset by lower price levels in response to lower input costs.
Organic net revenues for grocery declined 3% reflecting the planned discontinuation of less-profitable product lines, which accounted for about one-half of the revenue decline and the timing of a merchandising program versus the prior year. These factors more than offset solid growth from investments behind Kraft mayonnaise and Miracle Whip spoonable dressings and Jell-O dry packaged desserts.
Organic net revenues for the snacks declined 3.3% due to lower price levels. Solid volume/mix gains in core biscuit brands and snack nuts were offset by a decline in bars and the timing of a merchandising program versus the prior year.
Irene Rosenfeld, chairman and CEO of Kraft Foods, said: "We continue to build our operating and financial momentum despite the difficult consumer environment. Our volume/mix, profit margin and cash flow trends are strengthening as we successfully execute our growth plan. As a result, we expect to deliver higher earnings and cash flow in 2009(2), while further increasing our brand investments to drive future growth.
"We remain interested but will maintain a disciplined approach. Our criteria include accretion to cash EPS in the second year, delivering a return on investment well in excess of our cost of capital, and maintaining both our investment grade credit rating and our dividend."
Kraft Foods increased its guidance for 2009 diluted earnings per share to at least $1.97 compared to previous expectation of at least $1.93. The new guidance also reflects further investments in marketing to drive future growth and an estimate for certain costs in connection with the company's possible combination with Cadbury.
