Fiscal 2008 positive for Kraft, 2009 guidance lowered

by Keith Nunes
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NORTHFIELD, ILL. — Two years into Kraft Foods Inc.’s three year turnaround plan, the company is achieving positive results. For fiscal year 2008, ended Dec. 31, 2008, Kraft Foods had net income of $2,901 million, equal to $1.95 per share on the common stock. The results compared favorably with fiscal 2007, when Kraft Foods recorded net earnings of $2,590 million, or $1.64 per share. The company cited pricing actions taken during fiscal 2008, investments in brand building and improved cost management as reasons for the positive results.

For the fourth quarter, Kraft Foods was negatively impacted by restructuring charges and has lowered its earnings guidance for fiscal 2009.

"Despite a difficult environment in 2008, we delivered our commitments and made significant strides in staging the portfolio for sustainable growth," said Irene Rosenfeld, chairman and chief executive officer. "While our 2009 earnings face a number of headwinds, particularly currency and pension costs, we will complete our turnaround in 2009 by continuing to invest in our brands, better leveraging our overhead costs and improving both market shares and profit margins from 2008 levels."

Sales for fiscal 2008 were $42,201 million, which compared with $36,134 million for the same period during the previous year.

Kraft’s restructuring program, which concluded at the end of 2008, took a toll on the company’s fiscal 2008 fourth-quarter results. For the quarter, the company had net earnings of $163 million, or 11c per share. For the same period during the previous year, Kraft had net earnings of $585 million, or 38c per share. Sales for the quarter increased 6.2% to $10,767 million.

During the 2008 fourth quarter, Kraft incurred a 36c per share asset impairment charge due to exit and implementation costs. For the same period during fiscal 2007, the company recorded a 6c charge.

Looking ahead to fiscal 2009, Kraft said it expects organic net revenue growth of approximately 3%, down from the previous expectation of 4%, due to a decline in the contribution from pricing as certain input costs have declined. For the year, the company also lowered its earnings per share guidance down to $1.88 per share versus the previous expectation of $2 per share. The change is primarily due to currency and pension costs, according to the company.

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