Kraft Foods Inc. (KFT), the world's second largest food company, said Thursday after the markets closed that its second quarter profit rose 5% from last year, as pricing and productivity gains more than offset the impact of higher raw material costs.
The company's quarterly earnings per share, excluding items, also came in above analysts' expectations, but its quarterly revenue fell short of analysts' forecast.
Looking forward, the company confirmed its 2012 guidance of about 5% organic net revenue growth and at least 9% operating earnings per share growth on a constant currency basis.
The company also said it plans to spin-off to its shareholders its North American grocery business, Kraft Foods Group, Inc., on October 1. The company had first revealed its intention about the spin-off in August last year.
At the time of the spin-off, each of the company's shareholders entitled to receive shares of Kraft Foods Group will receive one share of Kraft Foods Group for every three shares of Kraft Foods Inc. The record date is not yet finalized, but is expected to be in mid-September. The common stock for both companies are expected to begin trading on a "when-issued" basis shortly before the record date.
Beginning October 2, Kraft Foods Group will begin to trade on The Nasdaq Global Select Market under the ticker symbol "KRFT." Kraft Foods Inc. will change its name to Mondelez International, Inc. and change its ticker symbol to "MDLZ."
Kraft shares are gaining 1.10% in after hours trading after closing the day's regular trading session at $38.94, down 45 cents or $1.14%. The shares trade in a 52-week range of $31.88 to $40.29.
The company's organic net revenues for the quarter increased 3.4%, driven by nearly 6% growth from Power Brands. Favorable pricing of 4.0 percentage points was partially offset by 0.6 percentage points from lower volume/mix.
Second quarter Kraft Foods North America net revenues grew 1.2% year-over-year to $6.4 billion, with organic net revenue growth of 1.7% led by higher pricing across each business segment.
Kraft Foods Europe net revenues fell 14.8% to $3.0 billion in the second quarter, with organic net revenue up 1.4%. Power Brands grew 3%.
Second quarter Kraft Foods Developing Markets net revenues declined 3.6% to $3.9 billion, while organic net revenue rose 7.6% driven by a balance of higher pricing and volume/mix growth.
For the second quarter ended June 30, 2012, the Northfield, Illinois-based company reported net income for the second quarter of $1.0 billion or $0.58 per share, compared to $976 million or $0.55 per share for the year-ago quarter.
Excluding integration program costs, spin-off costs and restructuring program costs, operating earnings for the second quarter were $0.68 per share, compared to $0.62 per share in the prior year quarter.
On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.66 per share for the second quarter. Analysts' estimates typically exclude special items.
The maker of Maxwell House coffee and Oreo cookies said net revenues in the second quarter fell 4.3% to $13.29 billion from $13.88 billion a year ago, due to a 5.0 percentage point headwind from currency and a negative 2.7 percentage point impact due to the benefit of accounting calendar changes in the prior year quarter. Fourteen analysts had a consensus revenue estimate of $13.96 billion for the second quarter.
In addition, Kraft Foods announced the composition of the boards of directors for the two independent companies that will be launched at the spin-off of its North American grocery business.
As previously announced, Rosenfeld will be Chairman and Chief Executive Officer of the global snacks company, Mondelez International, Inc. Cahill will be Executive Chairman of the North American grocery company, Kraft Foods Group, Inc., and Vernon, currently Executive Vice President and President, Kraft Foods North America, will be CEO.
Kraft also said that Tracey Belcourt will join the company as Executive Vice President, Strategy, in September. He will lead the strategy function and mergers and acquisition activities for the global snacks company, Mondelez International, Inc., following the spin-off.
In June, Kraft shifted its stock listing to the Nasdaq from the New York Stock Exchange to capitalize on greater cost efficiencies. The company's shares began trading on the Nasdaq on June 26. Kraft has also become a component of the Nasdq-100 Index, effective July 23.
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by RTT Staff Writer
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