Kraft fiscal year net rises despite fourth-quarter drop in sales

by Jeff Gelski
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NORTHFIELD, ILL. – Kraft Foods Inc. reported net earnings of $3,060 million for the fiscal year ended Dec. 31, 2006, a 16.3% increase from $2,632 million in the previous year. Diluted earnings per share for the fiscal year were $1.95, up 7.6% from the previous year’s $1.72.

Net revenues for the fiscal year, which had one less week than the previous fiscal year, rose 0.7% to $34,356 million even though fourth-quarter sales dipped 3% to $9,371 million.

"While we’ve made progress in 2006 on both the top and the bottom lines, the overall turnaround is not broad-based enough and the foundation for sustainable top-tier performance is not yet in place," said Irene Rosenfeld, chief executive officer. "This is likely to continue into the first half of 2007 as we get the business on a path to predictable growth."

Kraft expects to issue earnings-per-share guidance for 2007 on Feb. 20 at the Consumer Analysts Group of New York conference.

In 2006, net revenues rose 3.1% for Convenient Meals to $4,863 million, 1.7% for Snacks and Cereals to $6,358 million and 1% for Beverages to $3,088 million. Net revenues fell 2.7% for Cheese and Foodservice to $6,078 million, 9.7% for Grocery to $2,731 million and 0.8% for Kraft North America Commercial to $23,118 million.

Net revenue for Developing Markets, Oceania and North Asia jumped 11.2% in the fiscal year to $4,566 million while Kraft International Commercial saw net revenue growth of 3.9% to $11,238 million. European Union net revenues fell 0.6% in the fiscal year to $6,672 million.

Annualized ongoing savings for a cost restructuring program was about $540 million at the end of the fiscal year, up from $260 million at the end of 2005. Kraft has incurred total costs $1.6 billion since the inception of the program in 2004 and now expects total costs to be $3 billion, down from a previous expectation of $3.7 billion.

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