Kraft reports quarter's earnings

On July 18, Kraft Foods Inc., the North American food company, said second-quarter profits rose 13.5 per cent, meeting Wall Street expectations, in the company's first earnings report after offering shares to the public last month. According to Kraft, worldwide volume increases and growth in developing markets offset some weakness in US categories such as coffee, cheese, and cereal. Earnings at Kraft, which is majority-owned by Philip Morris Cos. rose to $ 581 million from $ 512 million. The results assume the company had owned cookie maker Nabisco, which it acquired in December, for all of last year. Excluding Nabisco's results, Kraft's earnings fell 11 per cent to $ 505 million from $568 million a year ago, due to higher interest expense and the amortisation of goodwill resulting from the Nabisco acquisition. Operating revenue in the quarter rose 25 per cent to $ 8.69 billion from $ 6.97 billion a year ago. Volume at Kraft's North American division, which accounts for the majority of its business, rose 2.8 per cent, helped by gains in beverages, desserts, cereals, pizza, Oscar Mayer meats, and some new products such as Nabisco's Chocolate Creme Oreos and Capri Sun juice in a pouch. The cheese business was hurt by higher commodity prices and the elimination of some lower-margin products, while Kraft's Post cereals faced increased promotions from rivals such as Kellogg Co. Internationally, Kraft saw volumes rise 4.9 per cent, helped by growth in Central and Eastern Europe, Latin America and Asia Pacific. Operating revenues fell 5.3 per cent to $ 2.17 billion. According to Kraft, weak overseas currencies cut about $ 24 million from international operating income. Volumes in Germany, a major market, fell on increased price competition and inventory reductions by retailers. Kraft's acquisition of Nabisco remains on track to deliver savings of about $ 600 million through 2004, with $ 100 million of savings expected this year. The company, which has already sold off some of Nabisco's units to meet antitrust concerns, said some other units would likely be sold this year.