Kraft Foods Inc (NYSE:KFT) posted higher-than-expected second-quarter profit but left its full-year targets unchanged, saying it plans to reinvest any upside back in the businesses.
Kraft also said on Thursday that the spin-off of its grocery business, which includes Maxwell House coffee and Oscar Mayer meat, would occur on Oct. 1.
It also named the members of the board of directors for that company, which will keep the Kraft name, and for the remaining snack food company, to be called Mondelez International.
Company executives said earnings in the first half of the year were running ahead of plan, helped by price increases, cost savings and an ongoing strategy of focusing on so-called power brands and pruning the less profitable brands.
Still, Kraft stood by its 2012 forecast, which calls for growth of about 5 percent for revenue and at least 9 percent for operating earnings.
"We would expect to reinvest any upside in the second half," said Chief Financial Officer David Brearton.
Kraft, which also makes Cadbury chocolate and Oreo cookies, now expects its cost of goods sold for the year rising at a mid single-digit rate, given the recent spike in corn costs due to the drought in the Midwest.
EARNINGS BEAT ESTIMATES, EUROPE STRONG
For the second quarter, Kraft posted net income of $1.03 billion, or 58 cents per share, up from $976 million, or 55 cents per share, a year earlier.
Excluding items, earnings were 68 cents per share. On that basis, analysts on average were expecting 66 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell to $13.29 billion, missing analyst estimates of $14 billion.
Easter came earlier this year compared to last year, so Kraft shipped more candy in the first quarter - hurting sales in the second quarter relative to last year.
Kraft also said sales were hurt by the stronger U.S. dollar, which reduces the value of overseas sales, and a difficult comparison with last year, when an accounting change boosted sales. It also lost some sales from pruning its product portfolio.
Despite ongoing macroeconomic troubles in Europe, organic net revenue there rose 1.4 percent in the quarter, excluding the impact of foreign exchange and accounting calendar changes.
"From that perspective Kraft stood out," said Morningstar analyst Erin Lash, referring to rival Kellogg, which reported earlier on Thursday that internal net sales fell 3.6 percent in Europe, though that was an improvement from the first quarter.
Kraft shares were flat in after-hours trade.