Kraft Performance Boosted by Cadbury Acquisition

Net revenues in the second quarter increased 25.3 percent to $12.3 billion, including a favorable impact of 22.8 percentage points from the Cadbury acquisition, 0.8 percentage points from currency and a negative 0.3 percentage point impact from divestitures.

Aug 9 2010 --- Kraft Foods Inc. has reported strong second quarter 2010 earnings that reflected increased gross profit margins and significant brand-building investments in every geography.

Net revenues in the second quarter increased 25.3 percent to $12.3 billion, including a favorable impact of 22.8 percentage points from the Cadbury acquisition, 0.8 percentage points from currency and a negative 0.3 percentage point impact from divestitures.

Combined Organic Net Revenues grew 2.2 percent, reflecting 2.0 percent organic net revenue growth from Kraft Foods' base business and 3.3 percent organic net revenue growth from Cadbury. Kraft Foods' base business growth was driven by 2.2 percentage points from volume/mix gains, partially offset by a negative 0.2 percentage points from pricing.

"We delivered strong earnings in the quarter and the first half of the year, despite difficult conditions in many markets that tempered top-line growth," said Irene Rosenfeld, Chairman and CEO. "We're making excellent progress on the Cadbury integration and expect to realize even greater synergies. In light of our strong earnings momentum, we will reinvest our 2010 upside to build our brands and to harmonize business practices. We will deliver at least $2.00 of Operating EPS this year while building a stronger foundation to achieve top-tier growth in 2011."

Operating income increased 16.8 percent to $1,701 million, including a favorable impact of 17.8 percentage points from Cadbury's operations, partially offset by a negative 11.0 percentage point impact from integration program and acquisition-related costs. Currency had a negative impact of 0.6 percentage points. Excluding these factors, Kraft Foods' base business operating income increased 10.6 percent reflecting volume/mix gains and productivity improvements, partially offset by higher raw material costs and increased advertising.

Operating income margin declined 100 basis points year- over-year to 13.9 percent, including a negative 130 basis point impact due to integration program and acquisition-related costs.

Kraft Foods' base business operating income margin expanded to 16.0 percent. The improvement was driven primarily by volume/mix gains and productivity improvements, partially offset by higher raw material costs and increased advertising.