Kraft Foods ups outlook as profits climb

by Staff
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NORTHFIELD, ILL. — A favorable product mix, increased advertising and successful cost cutting measures all combined to drive a significant increase in income at Kraft Foods Inc. for the second quarter, leading the company to raise its outlook.

In the period ended June 30, net income rose 46%, totaling $682 million, equal to 41c per share on the common stock, compared with income of $472 million, or 28c, in the same period last year.

The company continued with its cost-cutting initiatives during the quarter, which contributed to the increase in income. Year-to-date, seven facility closings had been designated and various headquarter overhead reduction programs and initiatives designed to simplify internal business practices had been implemented.

Ongoing savings for the program to date totaled approximately $385 million, up from approximately $260 million at the end of 2005.

Net revenue for the second quarter totaled $8,619,000,000, an increase of 3% from $8,334,000,000 in the year-ago period.

Net revenue in the North America beverages segment rose 6% to $819 million behind the introduction of the Tassimo beverage system and single-serve initiatives in powdered beverages, including new Kool-Aid Singles and new flavors of Crystal Light On-The-Go.

North America Cheese and Foodservice revenue rose 0.5% to $1.5 billion following the favorable shift in timing of Easter shipments and new products such as Kraft Crumbles natural cheese.

North America Convenient Meals reported net revenue growth of 7% to $1.23 billion as Oscar Mayer meats experienced double-digit revenue growth. The continued strength of Lunchables and the introduction of Kraft Easy Mac in a microwavable cup also boosted sales in this segment.

North America Grocery reported a decline in net revenue of 5% to $790 million, including an 8.7 percentage point impact from divestitures.

Finally, net revenue in North America Snacks and Cereals grew 6% to $1.61 billion as cracker sales led the way with the introduction of new flavors in Wheat Thins and strong performance in Triscuits. Lower revenues in children’s’ cereals were offset by the success of new Grape Nuts Trail Mix Crunch.

As a result of the successful quarter and the projected 13c one-time gain related to Kraft’s acquisition of United Biscuits, the company has increased its e.p.s. guidance for 2006 from $1.55 to $1.60 to $1.78 to $1.83.

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