Kraft Foods Inc. Posts Mixed Third Quarter 2006 Results
Growth was driven by North American convenient meals, biscuits, powdered beverages, cheese and cereals as well as Latin America and Eastern Europe.
24/10/06 Kraft Foods Inc. has reported third quarter 2006 net revenue growth of 2.3% from improved product mix and solid earnings gains driven by higher gross margins, restructuring savings and share repurchases.
"Our third quarter results were mixed. Our restructuring efforts have enabled us to fund a number of successful initiatives in some key growth areas, including 'better-for-you' products, snacking and convenient meals," said Irene B. Rosenfeld, chief executive officer. "However, while income growth was strong, our aggregate top-line growth is not where it needs to be. We must continue to invest to build our momentum and generate growth more broadly."
Net revenues for the third quarter grew 2.3% to $8.2 billion. Excluding a negative 1.4 percentage point impact from divestitures and a favorable currency impact of 1.5 percentage points, organic net revenue growth was 2.2%. Growth was driven by North American convenient meals, biscuits, powdered beverages, cheese and cereals as well as Latin America and Eastern Europe.
Product mix improvement was broad-based, contributing 3.6 percentage points to organic net revenue growth led by double-digit gains in sugar-free Crystal Light and reduced-sugar Kool-Aid powdered beverages and strong growth in developing markets. Pricing added 0.5 percentage points to revenue growth and included increases in Latin America, cookies, crackers and Eastern Europe that were partially offset by lower prices related to dairy costs in Cheese & Foodservice and increased promotional spending in European coffee.
While total ongoing volume declined 1.9 percentage points, strong gains were achieved across numerous products that provide consumers with convenient and/or better-for-you alternatives. Leading gainers included Oscar Mayer meats, Post cereals, Kraft natural cheese, DiGiorno pizza and Wheat Thins snack crackers. However, these gains were more than offset by product item pruning and the discontinuation of select product lines, primarily in the North American Foodservice and Canadian ready-to-drink beverage businesses, as well as weakness in several beverage and grocery franchises.
