Kraft Tames New Revenue Stream
Kraft Foods (NYSE:KFT), trying to cope with higher costs of ingredients, said increased international sales helped it post a higher profit in the first quarter. Kraft, which will split into two companies later this year so that it can focus on pushing products in new markets, was helped by the higher growth it received in developing markets, with sales there growing by as much as 8.5 percent.
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The company will split up its snacks business, which will focus on the newer markets, and the grocery business, which grows slower but has been delivering higher margins, later this year. The split is expected to offer shareholders better returns.
The packaged food maker posted net earnings of $813 million, or 46 cents per share, up 1.8 percent from $799 million, or 45 cents per share, a year earlier. Excluding some items, earnings came in at 57 cents per share, which beat expectations of 56 cents per share. Net revenue grew, too, rising 4 percent to $13.09 billion, slightly higher than the expected $13.03 billion.
The company, which owns Cadbury, Nabisco, Velveeta, and Miracle Whip brands, was also helped in offsetting rising ingredient prices by a price raise. It said pricing contributed 5.5 percentage points to growth, while volume added 1 percentage point. Kraft’s diverse product portfolio helps it do better than competitors Kellogg (NYSE:K) and General Mills (NYSE:GIS), whose products mainly fall into the breakfast category.
The company said it expects net revenue growth of approximately 5 percent for the full fiscal year, while operating earnings per share are expected to grow by at least 9 percent on a constant currency basis. Analysts are expecting the company to report earnings of $2.52 per share on revenues of $55.92 billion for the fiscal year.
The company’s shares have gained 6 percent this year, but the stock was down 1.09 percent, 0r 43 cents, to $39.16 in after-hours trading.
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