Kraft third-quarter profit rises, affirms outlook

NORTHFIELD, Ill., Wed Nov 7, 2012 – Kraft Foods Group Inc. reported higher third-quarter profit on Wednesday, citing help from new products, increased advertising and productivity gains.

The newly independent company, which makes Oscar Mayer lunch meat and Kraft cheese, said net income rose to $470 million, or 79 cents per share, from $417 million, or 70 cents per share, a year earlier.

Revenue increased 3 percent to $4.61 billion. Most of the gain was due to volume gains and selling a more expensive mix of products, with a smaller contribution from price increases.

The company affirmed its 2013 outlook, calling for earnings of $2.60 per share and revenue growth in line with the rest of the North American food and beverage market.

Kraft sees growth despite pruning products

NORTHFIELD, Ill. – Kraft Foods Inc. forecast earnings growth of at least 9 percent this year even as it prunes its portfolio of North American brands.

Kraft, North America’s largest packaged food maker, will separate into two companies later this year. One will focus on snacks like Cadbury chocolate and Oreo cookies, and the other will focus on North American grocery brands including Maxwell House coffee and Oscar Mayer lunch meat.

Kraft forecast 2012 net revenue growth of about 5 percent, including a hit of up to one percentage point from “product pruning” in North America.

The company said it expected operating earnings to rise at least 9 percent on a constant-currency basis, reflecting a higher tax rate and a 4 percentage point hit from higher pension costs.

Shares of Kraft were up 1.1 percent at $38.44 in trading before the market opened.

Kraft also said it would incur one-time costs of $1.6 billion to $1.8 billion as it prepares its split. It also might incur fees of between $400 million and $800 million as it migrates debt to the North American grocery company.

The company also reported quarterly earnings that met Wall Street estimates.

It said net income was $830 million, or 47 cents per share, in the fourth quarter, up from $540 million, or 31 cents per share, a year earlier.

Kraft to cut 1,600 jobs as it splits into two companies

NORTHFIELD, Ill. ― Kraft Foods Inc. said that splitting into two companies would lead it to cut about 1,600 jobs in North America this year and that its 2011 profit should be slightly higher than it had previously forecast.

Kraft also said its 2011 net revenue would be up by about 10 percent, as it ended the year with strong momentum around the world despite a tough operating environment. It expects to report 2011 operating earnings per share of at least $2.28, including a penny per share hit from currency in the fourth quarter.

Previously Kraft had forecast operating earnings per share of at least $2.27, excluding any potential currency impact in the fourth quarter.

Analysts, on average, had expected Kraft to earn $2.27 per share this year, according to Thomson Reuters I/B/E/S.

About 40 percent of the job cuts come from the company realigning its U.S. sales division, Kraft said. About 20 percent of the jobs being cut in the United States and Canada are currently open positions, the company said. The planned job cuts do not include any cuts at manufacturing facilities.

Kraft names leadership of new companies when it splits in 2013

NORTHFIELD, Ill. ― Kraft Foods Inc. named its chief executive, Irene Rosenfeld, to lead its snacks business and Kraft North America President Anthony Vernon to lead its North American grocery business when it splits in two next year.

The largest North American packaged food maker also said on Monday that John Cahill, currently a partner at Ripplewood Holdings, would join the company and become non-executive chairman of the North American grocery company.

Cahill is due to join Kraft in January as executive chairman, and serve in that role until the spin-off.

Before joining Ripplewood, a private equity firm, Cahill held senior finance positions at PepsiCo. Inc. and was involved in the 1999 spin-off of Pepsi Bottling Group. He later served as the bottler’s chairman and CEO.

Credit Suisse analyst Robert Moscow said the naming of Rosenfeld and Vernon was not surprising, and that the appointment of Cahill was “a huge positive,” given his reputation as a “top-tier executive” and his experience separating Pepsi Bottling from PepsiCo.

“Something as sensitive as this, where you’re splitting apart two companies, it’s a great idea to have someone who can focus so intensely on making that separation happen flawlessly,” Moscow said.

Kraft said Vernon would lead the grocery business as CEO, while Cahill, as chairman, would focus on “public company, financial and strategic matters.”

Some investors saw the appointment of Cahill, 54, as a sign that the grocery business, with brands like Oscar Mayer lunch meat and Kraft cheese, could eventually be in play given his private equity background, said Bernstein Research analyst Alexia Howard.

However, Howard wrote in a research note that she believed his appointment had “much more to do with his experience” in the separation of Pepsi Bottling from PepsiCo.

Kraft also said it still expects to complete the spin-off by the end of 2012.

Rosenfeld, 58, has been CEO of Kraft since 2006 and is credited with integrating Nabisco, leading Kraft through its spin-off from Altria Group Inc (MO.N) and acquiring Lu biscuits and Cadbury candy. She was widely expected to lead the snack business.Vernon, 55, joined Kraft in 2009.