US food manufacturer Kraft Foods has reported a 13.5% fall in third-quarter earnings, hit by commodity and energy costs.
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The company posted net earnings of US$674m, or 40 cents per share, for the quarter to 30 September, compared to $779m, or 46 cents per share, for the same period of the previous year. Earnings from continuing operations were down 12% from $766m.
The reduction in earnings was due to significantly higher commodity and energy costs and a prior year tax favourability.
Net revenues increased 4.4% to $8.06bn, with ongoing constant currency revenues up 3.6% from broad-based growth in North America, Europe and developing markets. Top-line growth reflected a balance of volume gains, positive product mix and commodity-driven price increases.
Kraft reduced its full-year 2005 earnings guidance to $1.68 – $1.71 from $1.73 – $1.78, reflecting higher-than-expected energy, packaging and dairy costs.
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By GlobalData“Our overall top-line momentum accelerated in the third quarter behind new products, positive mix and strong developing market growth,” said Roger Deromedi, chief executive officer.
“From a profit perspective, however, our price increases lagged the rise in commodity and energy costs, and our margins declined. The significantly higher costs continue to be a challenge for us, but we remain committed to increasing marketing spending and maintaining appropriate price gaps to improve our top-line momentum in the near-term and build brand value across our portfolio for the long-term. At the same time, given that we expect this higher cost environment to continue, we are exploring additional pricing actions,” he added.
