The US’s largest food company Kraft Foods yesterday (24 July) reported second quarter net earnings of US$682m, an increase of 44.5% over last year, while diluted earnings per share were $0.41, up 46.4%. However, when the impact of asset impairment, exit, and implementation costs, gains from the sale of businesses and earnings from discontinued operations are factored out, net earnings for the quarter grew 7% and EPS increased 8.5% to $0.51.
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Second quarter net revenues grew by 3.4% to $8.6bn, driven by organic net revenue growth of 4.9% thanks to a favourable product mix, the benefits of a strong increase in advertising and continued cost savings. Product mix contributed 3.6% to organic net revenue growth behind brands such as Wheat Thins, South Beach Diet, Jacobs coffee and Cote d’Or chocolate. Price increases added 0.4% to growth while ongoing volume added 0.9%.
Volume growth of 0.9% included gains in Oscar Mayer meats and Maxwell House coffee. Volume growth also included an estimated 1% benefit from the later Easter. In addition, the impact of product item pruning and the discontinuation of select product lines represented approximately 2% of prior year volume.
Kraft’s second quarter results prompted the company to raise its full year EPS guidance raised to $1.78 – $1.83 from $1.55 – $1.60 driven by a projected one-time gain related to the pending United Biscuits transaction and the timing of restructuring costs.
“Second-quarter results reflect further improvements in Kraft’s business fundamentals,” said Irene B. Rosenfeld, chief executive officer. “We’re making good progress focusing and strengthening the portfolio, which will set the stage for accelerating our growth.”
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