Kraft Foods Inc reported a higher-than-expected 11% rise in quarterly profit and raised its full-year forecast as the largest North American food maker benefits from price increases, cost cuts and people eating more meals at home.
The results came after food makers General Mills Inc and Kellogg Co also posted stronger-than-expected results and raised full-year forecasts in recent weeks.
Those reports had helped to bolster Kraft's shares, which had risen roughly 11% since the start of July. In late trading on Tuesday, its shares declined 1.4%.
“Investors expected Kraft to probably beat expectations this quarter as well, and also raise their outlook,” said Edward Jones analyst Matt Arnold of the stock's pullback in late trading.
He said the quarterly results show Kraft is gaining traction from the restructuring program it implemented in recent years.
Kraft said net income attributable to Kraft Foods rose to $827 million, or 56 cents a share, in the second quarter, from $745 million, or 49 cents a share, a year earlier.
Analysts, on average, forecast earnings of 54 cents per share, according to Reuters Estimates.
In recent years, Kraft has cut production costs while spending more on advertising and product development to help it garner higher prices and fend off competition from lower-priced store brands. It has also focused its advertising on saving money for consumers.
Chief Executive Officer Irene Rosenfeld said in an interview that consumers are eating more meals at home, helping spur sales of its sliced meats.
As the food maker looks to introduce new products, she said Kraft will continue to focus more heavily on developing value-oriented items that appeal to today's frugal shoppers.
Kraft said net revenue fell 5.9% to $10.2 billion, hurt by the impact of the stronger dollar, which lessens the dollar value of sales made overseas. Organic revenue, a measure of sales that excludes currency fluctuations, acquisitions and divestitures, rose 2.9%, helped by higher prices.
Its margins increased 1.9%age points to 15.1% compared with a year earlier, helped by the elimination of less profitable product lines.
Kraft now expects 2009 earnings per share to be “at least $1.93,” up from an earlier view of $1.88 per share. It still expects 2009 organic net revenue growth of approximately 3%.
Its shares fell to $27.93 after closing on the New York Stock Exchange at $28.34. (Reuters)