Kraft Foods Q3 Profit Up 7%, Lifts Full-year Earnings Outlook

(RTTNews) - Packaged foods giant Kraft Foods Group, Inc. (KRFT) on Wednesday reported a 7 percent increase in profit for the third quarter from last year, as lower revenues were more than offset by cost savings and a one-time gain. Looking ahead, the company raised its earnings outlook for fiscal 2013.

According to the company, the decline in revenues were primarily due to comparisons with higher, spin-off related shipments in the prior year. Last year, the company shipped safety stock to retailers ahead of a systems changeover as part of the spin-off from Mondelez InternationalInc. (MDLZ).

In 2012, Kraft Foods split from parent Kraft Foods Global Inc., with the international snacks unit named Mondelez International.

Tony Vernon, CEO of Kraft Foods said, "The unusual nature of last year's Q3 results obscures our steady progress in remaking the best brand portfolio in the food and beverage industry. There's no question it's a difficult environment for our consumers and customers."

Northfield, Illinois-based Kraft Foods' third-quarter net income was $500 million or $0.83 per share, up from $466 million or $0.79 per share in the same period last year. On average, 16 analysts polled by Thomson Reuters expected the company to earn $0.69 per share for the quarter. Analysts' estimates typically exclude special items.

The latest quarter's results included a benefit of $0.18 per share from market-based impacts to post-employment benefit plans. Excluding this benefit, earnings per share were lower than the prior year due to a $0.05 unfavorable year-over-year change in unrealized gains/losses from hedging activities, lower volumes, a higher year-over-year tax rate and higher interest expense.

The maker of Kraft Cheese, Maxwell House coffee, and Oscar Mayer deli meats, posted quarterly net revenues of $4.39 billion, down 4 percent from $4.59 billion in the year-ago period. Analysts had a consensus revenue estimate of $4.56 billion.

Organic revenues declined 4.1 percent from last year, reflecting lower volume/mix of 3.1 percentage points and 1.0 percentage point due to lower pricing.

Cost of sales for the quarter declined 4 percent to $2.91 billion, while selling, general and administrative expenses decreased 24 percent to $601 million. Asset impairment and exit costs were down 42 percent to $15 million.

Segment-wise, Kraft's beverages sales for the third quarter fell 8 percent on lower prices, while refrigerated meals sales edged down 1 percent reflecting a negative impact from comparisons with spin-off related shipments in the prior year period. Meanwhile, cheese sales grew 1 percent on higher prices and steady growth in Kraft natural cheeses and Velveeta slices.

In addition, Meals & Desserts sales decreased 6 percent due to a negative volume impact from comparisons with spin-off related shipments in the prior year period. Enhancers & Snack Nuts sales declined 10 percent on volume weakness as well as lower prices.

Canada sales were down 5 percent, reflecting negative volume impact of about 4 percentage points from comparisons with spin-off related shipments in the prior year period and lower prices on Kraft peanut butter.

Looking ahead to fiscal 2013, Kraft Foods now forecasts full-year earnings of about $3.58 per share, up from its prior estimate of $3.40 per share. Analysts currently expect earnings of $2.80 per share for the year.

The revised outlook reflects the additional $0.18 per share benefit from market-based impacts to post-employment benefit plans.

Kraft maintained its full-year outlook for organic net revenue growth to be in line with or slightly lower than that of the North American food and beverage market.

KRFT closed Wednesday's trading at $55.44, down $0.35 or 0.63 percent on a volume of 1.80 million shares.