Kraft Food 2Q profit up 11%; full year view lifted

MILAN – Kraft Foods Inc.’s second-quarter net income rose a surprising 11% as its costs dropped and grocery stores overall paid more to buy its food. The Northfield, Ill.-based company said after the market closed that it earned US$827 million, or 56 cents per share, in the three-month period that ended in June. That compares with earnings of US$745 million, or 49 cents per share, a year earlier.

The earnings beat analyst expectations, and the company boosted its profit guidance for fiscal 2009, saying it expects to see benefits from its recently completed restructuring, cost cutting and a focus on improving its products.

The maker of brands such as Maxwell House and Jacobs coffee said net revenues fell 5.9% to US$10.16 billion (including the unfavourable impact of 8.1 percentage points from currency and 0.7% points from divestitures), slightly missing analysts’ projections. But its organic revenue — which excludes divestitures, acquisitions and currency changes — grew by 2.9%.

The company said sales in its North American Foodservice segment dropped by 10%.

In the Us Beverage segment, organic net revenues increased 6.0% as volume/mix growth was partially offset by lower price levels. Ready-to-drink beverages grew at a double-digit rate. Coffee grew primarily due to strong growth in Maxwell House, aided, in part, by the Easter shift, said the company.

European profit nearly doubled despite flat organic revenue as higher prices and restructuring efforts boosted earnings. European revenue rose 0.4%, reflecting higher price levels, partially offset by lower volume/mix that was due, in part, to management’s decision to forego unprofitable volume. Strong growth of Milka and Freia Marabou as well as higher price levels drove the increase in chocolate. Double-digit growth of Kenco, Gevalia and Tassimo drove growth in coffee.

Biscuits declined as the impact of weakening economic conditions was partially offset by solid growth in regional priority brands and share gains in the United Kingdom and Belgium.

Organic revenue in the company’s Developing Markets segments rose 9.3% and organic profit increased 2.8%.

Net revenue in developing markets rose 9.3% on double-digit gains of drink brand Tang in markets like Latin America, Asia Pacific and Central and Eastern Europe.

The Northfield, Ill., food conglomerate increased its full-year forecast for earnings-per-share to at least U$1.93, from its previous projection of US$1.88.