Samuel
Wed, Oct-19-05, 10:37
http://www.nytimes.com/aponline/business/AP-Earns-Kraft.html
Kraft Foods 3Q Earnings Dip 13.5 Percent
By THE ASSOCIATED PRESS
Published: October 18, 2005
Filed at 9:36 p.m. ET
CHICAGO (AP) -- Kraft Foods Inc., the nation's largest food manufacturer, on Tuesday reported a 13.5 percent drop in third quarter earnings and said profits for the full-year would be lower than expected because of lofty commodity and energy costs.
The maker of Jell-O desserts, Oreo cookies and Grey Poupon mustard said net earnings for the July-September quarter were $674 million, or 40 cents a share, versus $779 million, or 46 cents a share, from the same quarter a year earlier.
Analysts surveyed by Thomson Financial had expected a profit of 46 cents a share.
The Northfield, Ill.-based company revised its full-year earnings outlook to $1.68-$1.71 a share, down from $1.73 to $1.78 per share ''as a result of higher than projected commodity costs that continue to impact the overall food industry.''
Kraft shares fell 4.2 percent in after-market trading, to $28.15, below its 52-week range of $29.14 to $36.06. The shares closed down 21 cents to $29.39 Tuesday on the New York Stock Exchange, before the company reported its financial results. The stock has fallen 17 percent in 2005.
The company said it now expects commodity costs to be $800 million higher than in 2004 -- about $200 million above previous estimates.
''Higher commodity costs remain our most significant challenge,'' Chief Financial Officer Jim Dollive told analysts during a conference call, citing higher trucking and packaging costs as especially damaging.
CEO Roger Deromedi said Kraft was unable to raise prices enough to offset the soaring cost of coffee, nuts, energy and other commodities. He said the company expects high costs to continue and is ''exploring additional pricing actions.''
But he added that the company must walk a fine line to avoid losing retail customers, who also are taking a financial hit from rising energy prices.
''We're cognizant and watchful of consumers' spending power as they're having to spend more on filling up their tanks of gasoline,'' Deromedi said. ''The important thing for us is to maintain and continue to build the value they see in our brands in the face of these other pressures.''
Morningstar analyst Gregg Warren said the entire food industry has been battered by recent high energy prices, which increases transportation and packaging costs.
''All these guys really thought they were going to have it easier this year because commodity prices were so high last year, but energy prices have been killing them,'' he said. ''It's honestly a matter of them getting through the commodity pricing cycle.''
Still, he said Kraft's better-than-expected revenue of $8.1 billion -- 4.4 percent higher than a year earlier -- showed that the company has shown some results from its three-year restructuring program and focus on new products.
Kraft said a 4.6 percent increase in U.S. sales of snacks and cereals and brisk coffee sales in Europe led revenue growth for the quarter.
Dollive said sales of new products are performing well, on pace to exceed $1.5 billion in revenue for the year. Its South Beach Diet line has eclipsed $100 million in sales since its launch in March and he said the company will expand the line next year.
He also said the company expects good things from recently announced new products, including a new version of Kraft Macaroni & Cheese with more vitamins and grains.
Kraft in early 2004 announced a sweeping corporate overhaul aimed at sharpening its global focus while shaving its broad product portfolio and boosting its spending on marketing. But the $1.6 billion effort -- which so far has included 5,200 of 6,000 planned layoffs -- has been hampered by higher costs.
Kraft, which is about 85-percent owned by Altria Group Inc., said the 2005 profit estimate includes 22 cents per share in restructuring costs and a 4 cent per share gain from sales of businesses.
Kraft Foods 3Q Earnings Dip 13.5 Percent
By THE ASSOCIATED PRESS
Published: October 18, 2005
Filed at 9:36 p.m. ET
CHICAGO (AP) -- Kraft Foods Inc., the nation's largest food manufacturer, on Tuesday reported a 13.5 percent drop in third quarter earnings and said profits for the full-year would be lower than expected because of lofty commodity and energy costs.
The maker of Jell-O desserts, Oreo cookies and Grey Poupon mustard said net earnings for the July-September quarter were $674 million, or 40 cents a share, versus $779 million, or 46 cents a share, from the same quarter a year earlier.
Analysts surveyed by Thomson Financial had expected a profit of 46 cents a share.
The Northfield, Ill.-based company revised its full-year earnings outlook to $1.68-$1.71 a share, down from $1.73 to $1.78 per share ''as a result of higher than projected commodity costs that continue to impact the overall food industry.''
Kraft shares fell 4.2 percent in after-market trading, to $28.15, below its 52-week range of $29.14 to $36.06. The shares closed down 21 cents to $29.39 Tuesday on the New York Stock Exchange, before the company reported its financial results. The stock has fallen 17 percent in 2005.
The company said it now expects commodity costs to be $800 million higher than in 2004 -- about $200 million above previous estimates.
''Higher commodity costs remain our most significant challenge,'' Chief Financial Officer Jim Dollive told analysts during a conference call, citing higher trucking and packaging costs as especially damaging.
CEO Roger Deromedi said Kraft was unable to raise prices enough to offset the soaring cost of coffee, nuts, energy and other commodities. He said the company expects high costs to continue and is ''exploring additional pricing actions.''
But he added that the company must walk a fine line to avoid losing retail customers, who also are taking a financial hit from rising energy prices.
''We're cognizant and watchful of consumers' spending power as they're having to spend more on filling up their tanks of gasoline,'' Deromedi said. ''The important thing for us is to maintain and continue to build the value they see in our brands in the face of these other pressures.''
Morningstar analyst Gregg Warren said the entire food industry has been battered by recent high energy prices, which increases transportation and packaging costs.
''All these guys really thought they were going to have it easier this year because commodity prices were so high last year, but energy prices have been killing them,'' he said. ''It's honestly a matter of them getting through the commodity pricing cycle.''
Still, he said Kraft's better-than-expected revenue of $8.1 billion -- 4.4 percent higher than a year earlier -- showed that the company has shown some results from its three-year restructuring program and focus on new products.
Kraft said a 4.6 percent increase in U.S. sales of snacks and cereals and brisk coffee sales in Europe led revenue growth for the quarter.
Dollive said sales of new products are performing well, on pace to exceed $1.5 billion in revenue for the year. Its South Beach Diet line has eclipsed $100 million in sales since its launch in March and he said the company will expand the line next year.
He also said the company expects good things from recently announced new products, including a new version of Kraft Macaroni & Cheese with more vitamins and grains.
Kraft in early 2004 announced a sweeping corporate overhaul aimed at sharpening its global focus while shaving its broad product portfolio and boosting its spending on marketing. But the $1.6 billion effort -- which so far has included 5,200 of 6,000 planned layoffs -- has been hampered by higher costs.
Kraft, which is about 85-percent owned by Altria Group Inc., said the 2005 profit estimate includes 22 cents per share in restructuring costs and a 4 cent per share gain from sales of businesses.