Kraft Foods Q4 Operating Profit Surges, Revenues Up

Kraft Foods has reported revenues of $11bn for the fourth quarter of fiscal 2009, an increase of 3.2% compared $10.68bn in the same quarter previous year. Operating income for the quarter quadrupled to $1.31bn compared to $330m in the prior year quarter.

For US Beverages segment, organic net revenues declined 1.9% as higher price levels were more than offset by unfavorable volume/mix. For US Cheese segment, organic net revenues declined 13.7% largely due to a 12.8% age point reduction from lower price levels. This price decline was in response to lower dairy costs, consistent with the company's adaptive pricing model.

For US Convenient Meals segment, organic net revenues increased 3.9% as strong volume/mix gains were partially offset by lower price levels in response to lower input costs. Oscar Mayer Deli Fresh meats delivered double-digit growth behind improved distribution and new product offerings.

For US Grocery segment, organic net revenues increased 0.1 % including a negative 0.6% age point impact from the discontinuation of less-profitable product lines.

For US Snacks segment, the organic net revenues declined 2.8 % reflecting weaker trends in the biscuit category in the second half of the year. For Canada & North America Foodservice, organic net revenues increased 0.1 % as strong volume/mix gains and higher price levels in Canada were partially offset by lower revenues in North America Foodservice.

In the near term, for its base business, Kraft Foods targets organic net revenue growth of 4% or more and the high end of its 7% to 9 % long-term EPS growth objective.

In addition, Cadbury's results will be consolidated with those of Kraft Foods from February 2, 2010, onwards. The combination of Kraft Foods and Cadbury is expected to provide the potential for meaningful revenue synergies over time.

The combined company continues to expect that pre-tax cost savings of at least $675m annually can be realized by the end of 2012. Total one-time implementation cash costs of approximately $1.3bn are expected to be incurred through the end of 2012.