Kraft Foods Earnings Call INSIGHTS: Organic Revenue Outlook, Separation Strategy
Organic Revenue Outlook
Bryan Spillane – Bank of America: Just two questions. One, I guess more of a clarification, just in terms of the October 1st date, are there any hurdles in between now and then that we have to think about that could potentially postpone that date?
A Closer Look: Kraft Foods Earnings Cheat Sheet>>
Irene B. Rosenfeld – Chairman and CEO: We don’t see any deal breakers, Bryan. As we said, we are on track to do the spin. We have a lot of stuff to do between now and then. The Canada Revenue Agency ruling is not a deal-breaker, but it is the biggest outstanding item that we have, but we do expect to hear shortly about that.
Bryan Spillane – Bank of America: Then second, just in terms of your organic revenue outlook for the year, if you look at the second quarter slowed sequentially from the first quarter, but you’ve maintained your 5% growth outlook for the year, so can you talk a little bit about some of the factors that you see that gives you the confidence to kind of re-accelerate the growth rate in the second half? Then also, just I guess, has there been any change in the way that Kraft has looked at where the contribution of that growth would come from I guess more – between the three segments, so is the trajectory, the growth rate — organic growth trajectory changed at all in any of the three segments versus what you were looking at earlier this year?
Irene B. Rosenfeld – Chairman and CEO: Simple answer is that most of the slowdown that you see in Q2 is really attributable to the Easter shift, and we actually feel quite pleased with our first half performance, and we’ve got some challenging comps in the back half of the year, but we do believe that the virtuous cycle that we’ve got going in each of the regions, the strong growth that we’ve got of our Power Brands and our continued strong A&C support and strong innovation pipeline should allow us to continue to fuel the momentum and that’s consistent with our reconfirming the guidance that we’ve given for the full-year.
Alexia Howard – Sanford C. Bernstein & Co.: Can I ask just a question on the separation. Would I be right in thinking that the plan is not to have another step up in overall corporate cost, as a result of the separation? I believe that the cost savings from the sales outsourcing initiatives and other restructuring activities that you announced earlier in the year that I think cost about $1.7 billion. Any step-up will be included within that, so we won’t see yet another step up in overall costs. Am I right in thinking that?
David A. Brearton – EVP and CFO: What we’ve said and I think we actually talk to in the Form 10 or actually it was that there would be some dissynergies and corporate would obviously be part of that, but that we’ve taken a clean sheet and really try to design organizations for both companies that would allow them to focus on the strategies and the value creation opportunities they each see and the savings as we do that would offset the dissynergies over time. So, we have said that and you’re right, that’s really where the restructuring money came back to.
Alexia Howard – Sanford C. Bernstein & Co.: One quick follow-up, just on the fundamental it looks as though developing market margin expansion was very strong last quarter, but fairly weak this time. Was there anything going on with brand building or where there other factors that were really driving that inflection?
David A. Brearton – EVP and CFO: No, I think our developing margins actually increased again this quarter. I wouldn’t get overly uptight about going up hugely one quarter and less the next quarter, I think year-to-date we’re up and even in the second quarter we’re up about 40 basis points. So, we feel pretty good about the margin trends in our developing markets.