US: Kraft raises outlook despite sales slide

Kraft Foods has raised its full-year earnings per share outlook, despite a fall in third quarter net earnings and revenues.

The US food giant, which signalled its interest in acquiring UK confectioner Cadbury in September, saw net earnings in the quarter ended 30 September fall to US$826m, down from $1.37bn a year earlier when the result was boosted by a one time gain from the sale of Post Cereals.

Sales totalled $9.8bn in the quarter, down 5.7% from $10.4bn last year. Revenue was hit by the strong dollar, sluggish demand in the US and Europe and the move to discontinue some of its less profitable businesses. Only two of Kraft's businesses reported net revenue growth - its US beverages business, up1.5%, and US convenience meals, up 5%.

Earnings per share from continuing operations totalled $0.55, up from $0.34 on a comparable basis.

Kraft raised its full-year earnings forecast to at least $1.97 per share, up from a previous forecast of $1.93. However, the group also cut its forecast for organic net revenue growth from 3% to 2%.

"We continue to build our operating and financial momentum despite the difficult consumer environment," said Irene Rosenfeld, chairman and CEO, insisted.

"Our volume/mix, profit margin and cash flow trends are strengthening as we successfully execute our growth plan. As a result, we expect to deliver higher earnings and cash flow in 2009, while further increasing our brand investments to drive future growth."

While Rosenfeld said that the group was still "interested" in acquiring Cadbury, she added that Kraft would maintain a "disciplined approach".

"Our criteria include accretion to cash EPS in the second year, delivering a return on investment well in excess of our cost of capital, and maintaining both our investment grade credit rating and our dividend."

Click here for the full press release, or check back later for just-food's insight into Kraft's third quarter numbers.