Kraft reconfirms 2006 guidance

22/02/06 Roger K. Deromedi, CEO of Kraft Foods Inc. has reviewed the company's progress against its Sustainable Growth Plan and reaffirmed the company's 2006 earnings guidance communicated in January. Deromedi presented at the annual Consumer Analyst Group of New York (CAGNY) Conference, held in Scottsdale, AZ.

During the presentation, Deromedi reconfirmed Kraft's 2006 full-year guidance. The company projects diluted earnings per share of $1.38-$1.43 in 2006, including $0.50 in restructuring and impairment charges.

"We expect our momentum to build as 2006 progresses," said Deromedi. "We believe that our market shares will continue to improve, our top-line growth will accelerate, our cost savings will grow and the quality of our earnings will improve.

"Ongoing constant currency revenues are projected to grow around 3% or greater in 2006 on a comparable 52-week basis (approximately 1% including the impact of one less shipping week than in 2005). Full-year discretionary cash flow, including divestiture proceeds, is projected to be $2.7 billion.Deromedi also affirmed Kraft's long-term financial targets, which include 3% growth in ongoing, constant currency revenues, 4-7% growth in operating income, 6-9% earnings per share growth and discretionary cash flow growth of 1-2 percentage points higher than growth in earnings per share.

"Our Sustainable Growth Plan is fixing our business, enabling us to take better advantage of both our scale and one of the best brand portfolios in the food and beverage industry," Deromedi said. "While our financial performance has lagged our improving business fundamentals, I'm confident that strong execution of our strategies will deliver improved results in 2006 and beyond.

"Deromedi reviewed the company's efforts to improve its Brand Value propositions - providing the right bundle of consumer benefits at the right price - including managing price gaps, increasing investments in advertising and, most importantly, strengthening new product innovations.Kraft is focusing its innovation efforts on "fewer, bigger and better" growth platforms that yield higher revenue-per-pound.

These growth platforms address consumer needs such as health and wellness, convenience and premium taste, and benefit from Kraft's scale by leveraging the company's proprietary technologies across its core categories. For example, the South Beach Diet product line, which crosses many of Kraft's categories and is in-line with each of these key trends, achieved more than $170 million in sales in its first ten months on the market. Other growth platforms highlighted by Deromedi included:

Health and Wellness: Kraft's innovative use of whole grain technologies impacted many areas of the company's portfolio, from Wheat Thins crackers to Chips Ahoy! cookies to belVita snack bars. Similarly, the company's fortification technologies are adding important nutritional benefits to products as diverse as Kraft cheeses, Kraft SuperMac & Cheese dinners and Tang powdered beverages.

Convenience: Whether it's in the cheese and dairy sector (Kraft to Go crackers & cheese), convenient meals (Easy Mac cups), coffee (Jacobs and Maxwell House sticks) or refreshment beverages (Crystal Light sticks and Kool-Aid singles), Kraft is helping consumers with innovative ways to make their favorite foods and beverages fit into their increasingly busy lives.

Premium Taste: In each of its sectors, Kraft is expanding its offerings of premium-quality products for which consumers are willing to pay a premium price. With diverse products such as California Pizza Kitchen frozen pizzas, Good Seasons salad dressings, Cote d'Or chocolates, and the Tassimo hot beverage system, the company is continuing to leverage its categories beyond their mainstream origins to keep pace with the evolving demands of today's marketplace.