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Kraft Q4 Earnings To Reflect Charges, Lifts FY13 EPS View


Packaged food company Kraft Foods Group, Inc. (KRFT) Friday said its fourth-quarter earnings will reflect charges and the impact of greater-than-anticipated trade inventory reductions, offset by strong gains from cost-savings measures. The company also sees lower revenues. Further, Kraft boosted its fiscal 2013 earnings view, due to an accounting benefit.

In pre-market activity, Kraft shares declined $0.51 or 1.08 percent, and are currently trading at $47.16.

Kraft was the North American grocery business of former food giant Kraft Foods Global, Inc., which is now Mondelez International, Inc. (MDLZ).

For the fourth quarter, Kraft now expects to report earnings of approximately $0.15 per share. The forecast includes a one-time, non-cash charge of about $0.24 per share due to the market-based impact from post-employment benefits, approximately $0.14 per share of Restructuring Program charges and $0.04 per share of unrealized losses from hedging activities.

On average, 13 analysts polled by Thomson Reuters expect earnings per share of $0.23 for the quarter. Analysts' estimates typically exclude one-time items.

Quarterly net revenue is now projected to be 10.7 percent lower than last year, lapping 9.2 percent growth in 2011. Analysts estimate revenues of $4.75 billion.

According to the company, the decline in projected revenues include a negative impact due to a 53rd week of sales last year, partly offset by a positive net impact from currency and sales to Mondelez.

In the preceding third quarter, the company had reported net earnings of $0.79 per share and net revenues of $4.61 billion.

The company also expects that fourth-quarter organic net revenue would decline 7.2 percent, in comparison to 7.8 percent organic net revenue growth a year ago.

Operating income would be about $260 million including one-time charges. However, excluding items, the company expects to report solid gains from operations, reflecting a reduction in ongoing post-employment benefit costs together with strong gains from productivity and overhead cost reductions.

These will more than offset the impact of lower sales volumes due to retail trade destocking, incremental costs of being an independent public company and a double-digit increase in advertising investment, the company noted.

Kraft said it expects to report final 2012 results no later than March 29.

Kraft CEO Tony Vernon said, "While we weren't satisfied with our revenue in the fourth quarter, our innovation, productivity and overhead cost reduction programs are paying off. We're off to a strong start so far this year and we remain well-positioned to drive profitable growth in 2013 and beyond."

In addition, Kraft has lifted its 2013 guidance for earnings per share to about $2.75 from its earlier guidance of around $2.60. The company sees a non-cash benefit of some $0.22 per share from the change in post-employment benefit accounting, partly offset by a $0.07 per share rise in expected Restructuring Program costs. Analysts project earnings of $2.65 per share for the year.

Consistent with previous guidance, organic net revenue growth for the year would be in line with the growth of the North American food and beverage market.

In addition, the company said it is executing a four-part comprehensive strategy to better manage and reduce the volatility of expenses and cash outlays related to its post-employment benefit obligations.

by RTTNews Staff Writer

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