Kraft Profit Falls, But Tops Estimates

(RTTNews) - Kraft Foods Group Inc (KRFT) on Tuesday said its profit for the first quarter declined more than 16 percent, hurt by lower demand for desserts and snack nuts as well as acquisition-related costs and other expenses, with revenues falling short of Wall Street expectations. Nevertheless, earnings for the quarter topped estimates.

Kraft, which is merging with ketchup maker H.J. Heinz Co, has been facing sales pressure. Faced with high commodity costs, the company last year raised prices for certain products like cheese.

Kraft said sales at its meals and desserts segment fell 2 percent in the quarter, and enhancer and snack nuts sales also dropped 2 percent due to lower net pricing from the timing of promotional activity.

Cheese segment sales grew 1.3 percent, on price increase along with the timing of Easter shipments, Kraft said.

Sales at refrigerated meals segment increased 2.1 percent, due to prior price increases in cold cuts and hot dogs, partly offset by unfavorable volume/mix.

Beverages revenue grew 4.2 percent from a combination of favorable volume/mix and higher net pricing.

Kraft noted that its sales in Canada slid 10.2 percent on unfavorable currency impact.

Overall, Northfiled, Illinois-based Kraft posted first-quarter sales of $4.35 billion, compared with $4.36 billion in the prior year. On average, 12 analysts polled by Thomson Reuters expected sales of $4.43 billion for the quarter.

Kraft's net earnings for the first quarter dropped to $429 million or $0.72 per share from $513 million or $0.85 per share last year. Fifteen analysts had an earnings estimate of $0.81 per share for the quarter. Analysts' estimates typically exclude special items.

The company said results for the quarter included a negative $0.14 per share impact due to losses from market-based impacts to post-employment benefit plans, spending on cost savings initiatives and costs related to the proposed merger with H.J. Heinz Holding Corp.

Kraft was formed through the split of parent Kraft Foods Global Inc in 2012, with its international snacks unit named Mondelez International Inc (MDLZ).

In March, Kraft agreed to merge with H.J. Heinz Co. which will create the fifth-largest food and beverage company in the world.

The merged entity, The Kraft Heinz Co, is expected to generate sales of about $28 billion with eight $1 billion plus brands and five brands between $500 million and $1 billion.

KRFT closed Tuesday at $85.88, up $0.01 or 0.01%, on a volume of 5.2 million shares on the Nasdaq. In after hours, the stock dropped $0.67 or 0.79% at $85.20. In the past year, the stock has traded in the range of $53.33 - $91.32.