Kraft's profit jumps 45%; outlook raised
Kraft Foods Inc., the nation's largest food company, on Monday said second-quarter profit rose nearly 45 percent, and it raised earnings guidance for the rest of the year--signs its restructuring program is starting to bear fruit.
Revenue rose 3.4 percent, to $8.62 billion, as the Northfield-based company continued to fight pressure from private-label brands being developed by grocery stores and big-box retailers.
However, sales volume rose only 1 percent, with beverage sales volume falling 2.1 percent for the quarter. Convenience-food sales volume grew 4.2 percent, reflecting a continuing switch by busy consumers to easier, faster meals.
'My goal is to step up our performance and get us growing faster,' said Irene Rosenfeld, who became chief executive of Kraft last month, replacing Roger Deromedi. Rosenfeld spoke on Monday's conference call with analysts but said she planned to discuss her plans for the company in early 2007.
'I am listening to consumers because at the end of the day, they will be the ones that determine the level of our success,' she said.
The maker of Oscar Mayer hot dogs, Oreo cookies and Velveeta cheese without warning replaced Deromedi last month with Kraft alumna Rosenfeld, chairman and chief executive of Frito-Lay. Rosenfeld had resigned from Kraft in July 2003 and was named Frito-Lay's leader in September 2004.
The sudden shift at Kraft came despite signs the company's efforts to cut costs were beginning to have an effect. The company is in the middle of a two-part restructuring calling for the closing of 40 plants and the elimination of 14,000 jobs.
Rosenfeld, in her first comments since taking the job June 26, said, 'I can say I am delighted to be back at Kraft. I feel a little bit like Rip Van Winkle. Much has changed,' she said, alluding to the two years that she had been away.
'I'm going to be focused on removing the barriers in the way to growing faster,' she said, indicating that simple changes could fix large problems.
Kraft has been battling an unrelenting rise in commodity costs, competition from private-label brands and an increase in concerns about a healthier lifestyle.
It efforts have come as its parent company, Altria Group Inc., has continued planning for an eventual spinoff of Kraft. Altria owns 85 percent of Kraft's outstanding stock.
Altria has said it will not consider spinning off Kraft to Altria's shareholders until the litigation environment over cigarettes improves. Of the three lawsuits cited as needing resolution before a spinoff, only one case remains. A final ruling in a case filed by the Justice Department is expected later this year.
For the second quarter, Kraft reported that second-quarter net income rose 44.5 percent, to $682 million, or 41 cents per share, from $472 million, 28 cents per share, in the year-ago quarter.
Excluding one-time charges from the impairment of assets, the costs of exiting existing businesses and write-downs in the value of businesses being sold, the company reported that net income for the quarter rose to $916 million, or 51 cents per share, from $799 million, or 47 cents per share.
For the six months, the company reported that revenue rose 2.1 percent, to $16.74 billion. Net income rose 42 percent, to $1.69 billion, or $1.02 per share, from $1.18 billion, or 70 cents per share.
Excluding special charges, the costs of exiting existing businesses and write-downs in the value of businesses being sold, the company reported that six-month net income rose to $2.13 billion, or 97 cents a share, from $1.55 billion, or 91 cents a share, from the year-ago period.
The company now expects full-year earnings of $1.78 to $1.83 per share, up from its previous guidance of $1.55 to $1.60 per share.
The earnings announcement came out after the close of regular trading on the New York Stock Exchange.
