Kraft 3Q Profit Down 40% On 2008 Gain, Lifts Fiscal Year View
DOW JONES NEWSWIRES
Kraft Foods Inc.'s (KFT) third-quarter profit declined a less than expected
40% as the food giant's 2008 profit was helped by the sale of its cereal
business. But revenue fell on currency impacts and lower costs again helped
boost margins.
Shares fell 2.9% to $26.75 in after-hours trading as sales fell short of
analysts' expectations.
The company again boosted its 2009 earnings target to at least $1.97 a share,
up from its August view of at least $1.93. Analysts most recently expected $
1.97, according to Thomson Reuters. The company cited its strong year-to-date
performance as well as a lower full-year tax rate estimate.
The market's reaction to the results are being closely watched as Kraft's
current proposal to buy confectioner Cadbury PLC (CBY) has a stock component.
The company is facing a Nov. 9 deadline to make a formal bid.
Regarding Cadbury, Chairman and Chief Executive Irene Rosenfeld said Tuesday
Kraft remained interested "but will maintain a disciplined approach."
Kraft--which makes Kraft cheese, Oscar Mayer lunch meats and Planters nuts--
posted a profit of $824 million, or 55 cents a share, down from $1.36 billion,
or 91 cents a share, a year earlier. The prior year included a 57-cent gain from
the $2.6 billion sale of Post cereals to Ralcorp Holdings Inc. (RAH).
Revenue declined 5.7% to $9.8 billion because of currency changes. On an
organic basis--which excludes divestitures, acquisitions and currency changes--
it grew 0.5%.
Analysts expected earnings of 48 cents on revenue of $10.32 billion.
Gross margin increased to 36.1% from 31.8% on lower costs. Margins have
improved over the past four quarters.
Lower commodity prices are helping the large food makers who were hurt last
year as their raw material costs surged. In recent weeks, food makers including
General Mills Inc. (GIS) and Kellogg Co. (K) reported better than expected
profit growth and higher margins.
Kraft'sNorth America earnings were up 17%, but organic revenue dropped 1.8%.
The best performer was so-called convenient meals, which includes products
ranging from Oscar Mayer meats to pizza.
European profit improved 83% although organic revenue fell 0.8%. Kraft also
continued to see strong growth in developing markets.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com
(END) Dow Jones Newswires
11-03-091702ET
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