Kraft Foods Inc. (KFT) reported Tuesday a 54 percent rise in fourth-quarter profit, driven by revenue growth, cost management and focused investments in major brands. Underlying earnings met the Street estimates, while top line missed. The food giant, which is readying to split itself into two public entities, projects earnings and revenues growth in 2012.
In the North American division, the company's largest, net revenues for the fourth quarter increased 8.9 percent. U.S. beverages unit revenues declined, but the effect was more than offset by improved performance in other divisions.
In Europe, continued investment behind Power Brands and focus on cost management drove strong top and bottom-line gains, Kraft added. The company also noted that developing markets delivered strong revenue and operating income growth despite volatile market conditions.
Although gross margin in the quarter was pressured by increasing material costs, operating margin rose to 10.3 percent from last year's 9 percent reflecting effective expense control measures.
Regarding the planned spinoff of its North America-based snacks and grocery businesses, the company said it would incur related one-time restructuring, transition and transaction costs of $1.6 billion - $1.8 billion. Kraft last August announced a spin-off into two independent public companies to focus on each company's distinct strategic priorities.
In the fourth quarter, net earnings attributable to the company climbed to $830 million from $540 million in the prior year. Earnings per share grew 51.6 percent to $0.47 from $0.31 last year.
The results included integration program costs of $0.08 per share and spin-off costs of $0.02 per share, while prior year's results included integration program costs of $0.15 per share.
Quarterly operating earnings per share, which excluded special items, climbed 23.9 percent to $0.57 versus last year's $0.46, and included a negative impact from foreign currency of $0.01 per share. The earnings came in line with the average estimate of 18 analysts polled by Thomson Reuters. Analysts' estimates typically exclude one-time items.
Net revenues grew 6.6 percent to $14.69 billion from $13.77 billion a year earlier, while analysts estimated revenues of $14.79 billion. On an organic basis, net revenues increased 6.1 percent.
Looking ahead, for fiscal 2012, the company projects operating earnings per share to grow at least 9 percent at constant currency, compared to $2.29 per share earned in 2011. In the new year, Kraft Foods expects organic net revenue growth of nearly 5 percent from fiscal 2011 level of $54.4 billion.
Chairman and CEO Irene Rosenfeld said, "We expect to deliver top-tier growth in 2012, in line with our long-term targets, while we prepare to successfully launch the North American grocery and global snacks companies later this year."
Kraft Foods shares are currently trading at $38.37 in pre-market activity, up $0.36 or 0.95 percent.
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