Tax benefit boosts net income at Kraft

by Staff
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NORTHFIELD, ILL. — Kraft Foods Inc.’s full-year 2006 guidance remains unchanged at $1.55 to $1.60 per share as net income for the first quarter ended March 31 grew 41% when compared with the previous year’s first quarter.

Kraft on Wednesday reported net income of $1,006,000,000, equal to 61c per share on the common stock, for the first quarter, which compared with $669,000,000, or 41c per share, in last year’s quarter. During the quarter, the favorable resolution of the Altria Group, Inc. 1996-1999 I.R.S. tax audit resulted in a reimbursement to Kraft that benefited net earnings by a total of $405 million, or 24c per share.

Also during the quarter, the company incurred $215 million in asset impairment, exit, and implementation costs and $3 million in losses on sales of businesses.

"Our year is off to a good start," said Roger K. Deromedi, chief executive officer of Kraft Foods. "Our brand value propositions strengthened with successful new products, quality enhancements and marketing initiatives. We continued to drive out costs and simplify our business. While input costs and the E.U. remain challenging, I’m confident that our momentum will continue to build as 2006 progresses."

Commodity costs in the first quarter were approximately $100 million higher than in last year’s first quarter, primarily in packaging, energy and coffee, as well as actions taken to address price gap issues in select categories.

Net revenues grew 1% to $8,123,000,000 in the quarter, boosted by a 7.1% increase in North America Snacks & Cereals sales. In its other divisions, net revenues and ongoing constant currency revenues in North America Beverages increased 3% and North American Convenient Meals sales rose 6.5%. At the same time, sales fell 1.4% and 12.1%, respectively, in North America Cheese and Foodservice and U.S. Grocery.

The company continues to make progress on its three-year cost restructuring program. Year-to-date, six facility closures have been announced, including two during the month of April, as well as headquarters overhead reduction programs and various initiatives to simplify internal business practices. Savings in the first quarter totaled approximately $100 million for the company’s restructuring program, an increase of approximately $50 million versus the first quarter last year.

Kraft shares closed Wednesday at $29.53 on the New York Stock Exchange.

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