Kraft's Profits Boosted by Cadbury Acquisition

Net revenues increased 7.3 percent, including a 4.6 percentage point impact from the Cadbury acquisition and a favorable 1.9 percentage point impact from currency.

7 May 2010 --- Kraft Foods Inc. has reported strong first quarter 2010 results driven by good operating momentum in every geography. Volume/mix improved sequentially from the fourth quarter 2009 and contributed significantly to income growth and margin expansion for Kraft Foods' base business.

"Our first quarter results are early evidence of our future potential in combination with Cadbury," said Irene Rosenfeld, Chairman and CEO. "We demonstrated strong momentum in our Kraft Foods' base business, including high-quality top-line growth and strong operating gains. In addition, our Cadbury business delivered solid financial results."

Rosenfeld continued, "Our integration is progressing extremely well. We moved quickly to name our leadership teams, and I'm pleased that about a third of our top 50 executives are from Cadbury. We've confirmed our synergy targets and the specific initiatives that will drive future margin expansion and accelerate our growth."

Net revenues increased 7.3 percent, including a 4.6 percentage point impact from the Cadbury acquisition and a favorable 1.9 percentage point impact from currency.

Combined Organic Net Revenues increased 1.3 percent reflecting 1.1 percent organic net revenue growth of Kraft Foods' base business and 6.4 percent organic net revenue growth of Cadbury. Earlier shipments of Easter products had a favorable impact of approximately one-half percentage point versus the prior year.

Kraft Foods' base business growth was driven by volume/mix gains of 1.5 percent. Pricing in the quarter declined due to a negative 0.6 percentage point impact from lower price levels in response to lower dairy costs. Growth in the quarter was also tempered by lower natural cheese volumes and a significant year-over-year decline in merchandising at a key North American customer. However, earlier shipments of Easter products partially offset this impact.

Cadbury growth reflected strong gains in Trident, Stride and Dentyne gum as well as Sour Patch candies that were partially offset by lower volumes of Halls cough drops due to a mild flu season.

Segment operating income grew 20.3 percent including favorable impacts of 5.5 percentage points from the Cadbury acquisition, net of acquisition-related costs, and 1.6 percentage points from currency. Excluding these factors, double-digit growth in operating income reflected productivity savings and volume/mix gains, partially offset by increased investments in advertising.

For Kraft Foods Europe net revenues increased 40.5 percent, including a 30.7 percentage point impact from the Cadbury acquisition and a favorable 7.8 percentage point impact from currency.

Combined Organic Net Revenues increased 3.1 percent reflecting Kraft Foods' base business organic net revenue growth of 2.5 percent and Cadbury organic net revenue growth of 5.3 percent. Earlier shipments of Easter products had a favorable impact of approximately one percentage point versus the prior year.

Kraft Foods' base business growth was driven by volume/mix growth of 4.8 percentage points, partially offset by a negative 2.3 percentage point impact from net price reductions. Earlier shipments of Easter products also had a favorable impact. The priority brands collectively grew at 8 percent.

Cadbury growth benefited from gains in Cadbury Dairy Milk chocolate in the U.K. as well as a favorable impact from earlier shipments of Easter products versus the prior year.

Segment operating income grew 97.9 percent including favorable impacts of 39.9 percentage points from the Cadbury acquisition, net of acquisition-related costs, and 12.9 percentage points from currency. Excluding these factors, the increase was primarily due to gains from strong volume/mix growth while benefits from overhead cost reductions were reinvested in advertising.

Net revenues in Kraft Foods Developing Markets increased 66.7 percent, including a 49.2 percentage point impact from the Cadbury acquisition and a 7.7 percentage point impact from currency.

Combined Organic Net Revenues increased 10.8 percent reflecting Kraft Foods' base business organic net revenue growth of 10.7 percent and Cadbury organic net revenue growth of 11.1 percent.

Kraft Foods' base business growth was driven by 5.9 percentage points from volume/mix gains and 4.8 percentage points from higher price levels. The priority brands collectively grew 19 percent.

Cadbury delivered strong growth primarily reflecting gains in gum across Latin America and chocolate in Asia, particularly India and Australia.

Segment operating income grew 73.4 percent including positive impacts of 44.0 percentage points from the Cadbury acquisition, net of acquisition-related costs, and 20.7 percentage points from currency. Excluding these factors, the increase was due to strong net revenue growth, partially offset by higher marketing investments and overheads.

Kraft expects Combined Organic Net Revenue growth of at least 4 percent in 2010, driven by approximately 4 percent organic net revenue growth of Kraft Foods' base business and approximately 5 percent organic net revenue growth of Cadbury.