Branded food and beverage giant Kraft Foods has posted pro forma diluted earnings per share (EPS) up 17% to US$0.55 for its Q2 2002, and pro forma net earnings up 17.1% year on year to US$960m.
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“Kraft delivered strong earnings growth in the quarter, keeping us in line with our earnings projections for the full year,” said co-CEO Betsy D. Holden: “The Nabisco integration, our productivity programmes and new product initiatives are all tracking well, and we are benefiting from lower interest expense. We continue to expect pro forma diluted EPS for the year in the range of US$2 to US$2.05, a 14% to 16% increase versus 2001.”
Co-CEO Roger K. Deromedi added: “Pro forma volume grew 2.1% in the quarter reflecting positive trends in many categories and most international markets. We expect volume growth to accelerate in the H2 driven by new product introductions, increased marketing investment and gains in developing markets. For the year, we expect volume growth to be around 3%.”
During the quarter, Kraft declared a quarterly dividend of US$0.13 per common share.
On a reported basis, worldwide volume increased 7% during the Q2 and net revenues were up 0.5% to US$7.5bn. Operating companies income increased 1% to US$1.7bn, on volume gains, productivity and synergy savings, partially offset by costs associated with the integration of Nabisco. Net earnings increased 78.4% to US$901m and diluted EPS increased 57.6% to US$0.52 due to lower interest expense, resulting primarily from debt retirement following Kraft’s 13 June 2001 IPO, and the elimination of substantially all goodwill amortisation.
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By GlobalDataIncluded in Q2 reported results are pre-tax charges of US$92m related to various consolidation programmes. Cumulative integration-related charges total US$314m.
Pro Forma Results
Pro forma worldwide volume increased 2.1%. Net revenues decreased 1.1%; volume growth being offset by the adverse effect of currency, lower selling prices in response to lower commodity costs and product mix. Operating companies income increased 6%, while net earnings increased 17.1% and diluted EPS increased 17% reflecting lower interest expense.
Kraft Foods North America
Volume for Kraft Foods North America (KFNA) increased 2% due primarily to strong results in the Beverages, Desserts and Cereals segment and the Biscuits, Snacks and Confectionery segment, including contributions from new products. Net revenues increased 0.4% as the favourable impact of volume growth was partially offset by reduced prices in response to lower commodity costs and the impact of product mix. Operating companies income improved 6%, driven by volume growth and productivity and synergy savings.
Cheese, Meals and Enhancers volume was down 1.5%. Operating companies income increased 4.9% driven by lower dairy commodity costs and productivity savings. Biscuits, Snacks and Confectionery volume was up 2.9%. Operating companies income was up a strong 17.7% driven by higher volume and synergy savings. Beverages, Desserts and Cereals recorded strong volume growth of 7.5%. Operating companies income was up 2% driven primarily by the increase in volume and productivity savings, partially offset by higher marketing spending. Oscar Mayer and Pizza volume increased 1.4%. Operating companies income was up 0.6% on increased volumes and productivity savings, partially offset by increased merchandising spending.
Kraft Foods International
Volume for Kraft Foods International (KFI) increased 2.4% driven by gains in both the Europe, Middle East and Africa (EMEA) segment and the Latin America and Asia Pacific (LAAP) segment, benefiting from acquisitions, growth in developing markets and new products. Volume in developing markets, including acquisitions, grew 5.9%, despite weak economies in a number of countries.
Net revenues decreased 5.1% due to unfavorable currency of US$114m. On a constant currency basis, net revenues increased 0.4% as the favorable impact of higher volume, which benefited from acquisitions, and of pricing, was mostly offset by the impact of mix.
Operating companies income increased 6.0%, resulting from productivity and synergy savings. Excluding an unfavorable currency impact of US$8m, operating companies income increased 8.7%.
EMEA volume increased 3.7% driven by acquisitions and growth, partially offset by a decline in Germany. Operating companies income increased 10.4% benefiting from higher volume and margins, and a favourable currency impact of US$2m. On a constant currency basis, operating companies income increased 9.4%.
EMEA Snacks volume increased, driven by confectionery and salty snacks performance. EMEA Beverages volume was down slightly and Cheese volume grew, driven by gains in the Middle East and Africa, Spain and across Nordic markets. EMEA Convenient Meals volume grew strongly, resulting from higher canned meats volume in Italy and the continued success of Dairylea Lunchables in the UK. EMEA Grocery volume also increased.
LAAP volume increased 0.6% as growth was moderated by declines in select countries. Operating companies income was down 1.9%, due to a US$10m unfavourable currency impact in Latin America. Overall snacks volume growth was moderated by softness in Argentina due to the economic crisis and a decline in biscuits in China due to distributor inventory reductions.
LAAP Beverages volume grew double-digit, driven by the strength of Tang powdered beverages in Brazil, Argentina, the Philippines and Venezuela.
