4 May 2012 --- Kraft Foods Inc. reported strong first quarter 2012 results that were driven by accelerated growth of Power Brands, new product innovation and effective cost management in each geography.

"Our brand-building investments continue to win over consumers around the world in these tough economic times, and that's fueling our strong business momentum," said Irene Rosenfeld, Chairman and CEO.  "We remain on track to create two industry-leading companies by the end of this year.  As we execute this plan, I'm confident that we will again deliver top-tier results for our shareholders in 2012."

Net revenues were $13.1 billion, up 4.1 percent.  Organic Net Revenues increased 6.5 percent, driven by 11 percent growth from Power Brands.  Pricing contributed 5.5 percentage points of growth, while volume/mix contributed 1.0 percentage point.  The shift of Easter-related shipments into the first quarter benefited volume/mix by approximately 1.3 percentage points, while product pruning in North America had a negative impact of approximately 0.5 percentage points.

Operating income was $1.7 billion, and operating income margin was 12.9 percent.  Underlying Operating Income, which excludes Integration Program costs, Restructuring Program costs and Spin-Off Costs, grew 5.8 percent to $1.9 billion, driven by the effective management of input costs and volume/mix gains.  These gains were tempered by the net impact of the following factors:  significantly higher pension costs, the year-over-year change of unrealized gains/losses from hedging activities, an asset impairment charge, the loss of the Starbucks CPG business and a gain on sale of an asset.  Underlying Operating Income margin rose 0.2 percentage points to 14.1 percent, despite the impact of the higher revenue base (from pricing) on the margin calculation of approximately 0.7 percentage points.

Diluted EPS was $0.46.  Operating EPS was $0.57, up 9.6 percent, driven primarily by operating gains.  Operating EPS growth was negatively impacted by $0.02 from the net impact of the following factors:  the change in unrealized gains/losses from hedging activities, an asset impairment charge, the loss of the Starbucks CPG business and a gain on sale of an asset. Favorable foreign currency added $0.01, while higher pension costs were a $0.02 headwind.

Solid Top and Bottom-Line Growth in North America

Power Brands, new products and a continued focus on cost management fueled solid revenue and Underlying Operating Income growth in Kraft Foods North America.

Net revenues increased 1.3 percent.  Organic Net Revenues grew 3.0 percent, led by higher pricing across each business segment, partially offset by lower volume/mix.  Power Brands grew more than 6 percent.  The Easter shift added more than 1 percentage point to volume/mix.  However, this was more than offset by the impacts of product pruning of approximately 1 percentage point and lower shipments of Capri Sun ready-to-drink beverages, due to higher sales in the fourth quarter of 2011 in advance of an announced price increase.

Segment operating income declined 4.0 percent, including a negative 7.2 percentage point impact from Restructuring Program costs net of lower Integration Program costs versus the prior year, and a negative 1.5 percentage point impact from the loss of the Starbucks CPG business.  Excluding these factors, segment operating income increased mid-single digits, reflecting effective management of input costs and lower SG&A, partially offset by unfavorable volume/mix.

Europe Delivered Strong Growth in a Difficult Environment

Robust Power Brand growth, aggressive cost management and a continued focus on capturing synergies drove strong revenue and operating income gains in Kraft Foods Europe.

Net revenues increased 4.5 percent.  Organic Net Revenues increased 7.2 percent.  Volume/mix contributed 4.4 percentage points of growth, including an approximately 2 percentage point benefit from the Easter shift.  Power Brands grew nearly 11 percent.

Segment operating income grew 24.7 percent, including a favorable 12.4 percentage point impact from lower Integration Program costs versus the prior year and a negative 3.0 percentage point impact from currency.  Excluding these factors, favorable volume/mix, effective management of input costs and lower overheads drove mid-teens segment operating income growth.  These gains were tempered by a strong increase in advertising and consumer support, particularly behind Power Brands.

Broad-Based Growth in Developing Markets

Kraft Foods Developing Markets delivered double-digit organic revenue and operating income growth with strong contributions from each region.

Net revenues increased 8.5 percent.  Organic Net Revenues grew 11.5 percent, driven by both higher pricing and volume/mix gains, including an approximately 1 percentage point benefit from the Easter shift.  Power Brands grew nearly 18 percent.

Segment operating income increased 29.6 percent, including a positive 5.5 percentage point impact from lower Integration Program costs versus the prior year, and a favorable 0.9 percentage point impact from currency.  Excluding these factors, the strong double-digit growth in segment operating income was driven by volume/mix gains, effective management of input costs and a gain on the sale of an asset.  This was partially offset by a double-digit increase in advertising and consumer support, investments in the sales force and an asset impairment charge.