Kraft reports increased earnings on lower sales

by Keith Nunes
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NORTHFIELD, Ill. — Kraft Foods Inc. announced for its third quarter 2009, earnings per share from continuing operations were $0.55, up from $0.34 in third quarter 2008. Net revenues slipped 5.7% to $9.8 billion.

Organic net revenues grew 0.5% driven by 0.7 percentage points from volume/mix, partially offset by negative 0.2 percentage points from pricing.

Regarding U.S. Convenient Meals, organic net revenues increased 5.0% as strong volume/mix gains were partially offset by lower price levels in response to lower input costs. Pizza generated double-digit growth behind further gains in market share. Incremental investments in value-oriented consumer programs drove more than 20% growth in DiGiorno pizza.

Oscar Mayer Deli Fresh meats also delivered double-digit growth. The planned discontinuation of less-profitable product lines slowed growth by approximately 1%.

Segment operating income increased 60.8% as improved alignment of prices with input costs, strong volume/mix gains and lower costs due to the completion of the restructuring program more than offset increased marketing investments.

Kraft Foods increased its guidance for 2009, raising diluted earnings per share to at least $1.97 versus the previous expectation of at least $1.93. This guidance reflects strong year-to-date profit performance and a reduction in its full-year effective tax rate to approximately 30.0% versus the previous expectation of approximately 31.5%, the company said.

"We continue to build our operating and financial momentum despite the difficult consumer environment," said Irene Rosenfeld, chairman and chief executive officer. "Our volume/mix, profit margin and cash flow trends are strengthening as we successfully execute our growth plan. As a result, we expect to deliver higher earnings and cash flow in 2009, while further increasing our brand investments to drive future growth.

"We remain focused on driving sustainable top-line growth, while implementing our strong cost-savings pipeline," she added. "We are making good progress toward our goal to be at or above industry margins in the next two years, and are well-positioned to deliver top-tier performance."

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