Kraft raises full-year guidance, updates strategies

by Staff
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BOSTON — Increased confidence in growth initiatives, the pace of a stock buyback program and a lower-than-expected tax rate in 2007 have led Kraft Foods Inc. to raise its 2007 earnings per share guidance to $1.60 to $1.62 per share, or to $1.80 to $1.82 excluding items that affect comparability.

This is up from an e.p.s. of $1.55 to $1.60 per share on a reported basis, or $1.75 to $1.80 per share excluding items affecting comparability.

Along with the announcement of the raise in guidance, Irene Rosenfeld, chief executive officer, detailed the company’s growth strategies at the Lehman Brothers Back-to-School Consumer Conference held Sept. 5 in Boston.

Kraft has identified four growth strategies for growth, which include rewiring the organization for growth, reframing the company’s categories to make its portfolio more relevant to consumers, exploiting Kraft’s sales capabilities and driving down costs without compromising quality.

"I’m pleased to say we are making progress against each of these strategies," Ms. Rosenfeld said. "Our top-line results are improving and we’re now building on that momentum."

To reframe categories, Kraft is spending $300 million to $400 million in 2007 on product quality improvements, new products and increased marketing.

"We’re spending on programs to accelerate our revenue growth as quickly as possible, deliver sequential improvement in our market share performance and set the stage for improved profit margins beginning in 2008," Ms. Rosenfeld said. "Our key 2007 initiatives are driving organic growth in every geography."

To rewire the company for growth, the company has established a new management team with about half of the top executives either new to Kraft or new to their position. The company also has linked its annual incentive program to coordinate more directly to business unit performance and linked its longer-term incentive program to key drives of value creation such as organic revenue growth, operating income growth, cash flow and total shareholder return.

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