BOSTON — Kraft Foods Inc. forecast it will deliver earnings of at least $2 per share in fiscal year 2009 thanks to boosts from an ongoing turnaround plan and continued international growth.
Company executives, when speaking at the Lehman Brothers Back-to-School Consumer Conference in Boston Sept. 3, also updated financial guidance for 2008 to reflect the recent split-off of the Post cereals business. The company projects organic net revenue growth of at least 6% for 2008 and e.p.s., excluding items, of at least $1.88, which reflects a negative impact of 4c from the exit of the Post cereals business. Also, Kraft’s full-year effective tax rate is expected to be 33% as the large U.S. Post cereals business is moved to discontinued operations.
Kraft has reached the mid-point of a three-year turnaround plan. The company expects to reach about $1.1 billion in savings by the end of 2008. Spending on the program will be about $900 million in 2008, for a total of $3 billion.
"We have found ways to optimize some of the initiatives under our existing restructuring program," said Tim McLevish, executive vice-president and chief financial officer. "This will lead to annualized savings of $1.4 billion, which is $200 million greater than previously expected."
In 2009, Kraft will target organic net revenue growth of at least 4% and e.p.s. of at least $2 on a GAAP basis, which reflects double-digit growth from continuing operations and is higher than the 7% to 9% long-term target on an "apples to apples basis," Mr. McLevish said.
Irene Rosenfeld, chairman and chief executive officer, said, "As our portfolio has improved and our momentum builds, we are returning Kraft to reliable long-term growth. I’m confident we’ll hit our stride in 2009 and deliver earnings of at least $2 per share."
International growth strategy will include greater focus on core categories, brands and geographies, said Sanjay Khosla, executive vice-president and president, Kraft International. For the first six months of fiscal 2008, Kraft International’s organic revenue growth was nearly 12%, up from nearly 7% in the first six months of 2007.
"Instead of planting Kraft flags all over the world and trying to be all things to all people, we are now focusing where we can win," Mr. Khosla said.