Kraft affirms outlook, shares rise

Published November 07, 2012

| Reuters

Kraft Foods Group Inc reported higher third-quarter profit on Wednesday and stood by its full-year outlook despite little improvement in the economy, and its shares rose 1.5 percent in premarket trading.

Kraft said that because of the weak economy it must drive sales volume with more advertising and a greater range of products and prices. Kraft, which was spun off last month from the company now called Mondelez International, calls this a "good, better, best" strategy.

"You have to be able to offer price points and innovation in all segments," said Kraft Chief Executive Tony Vernon. He said specific areas needing improvement were Maxwell House coffee, Planters nuts and Jell-O.

"The economic environment has not improved and that creates a burning platform for Kraft, our customers and our industry," Vernon said.

Kraft said net income rose to $470 million, or 79 cents per share, from $417 million, or 70 cents per share, a year earlier.

Revenue increased 3 percent to $4.61 billion. Most of the increase was due to volume gains and selling a more expensive mix of products, with a smaller contribution from price increases.

The company affirmed its 2013 outlook, calling for earnings of $2.60 per share and revenue growth in line with the rest of the North American food and beverage market.

Kraft said revenue in the current fourth quarter would be flat to down due to a comparison with the year-earlier period when retailers increased orders in advance of a price increase.

In addition, Kraft will lose sales from some products that it pruned from its portfolio.

It said retailers would be working down higher inventories built up during the latest third quarter, ahead of the spin-off from Mondelez, which sells Cadbury chocolate and Oreo cookies.

Mondelez is due to report earnings later on Wednesday.

Kraft shares rose to $45.38 in premarket trading, from Tuesday's close at $44.70 on the Nasdaq.

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