The Chicago-based company posted a 0.7% rise in net sales to $6.69bn for the quarter, topping the average estimate of $6.59bn.
Sales from the US – the company’s biggest market – fell 1.9% to $4.51bn, but still topped the estimate of $4.43bn.
Both EMEA and Rest of World net sales were up – 8.7% to $703m and 13.5% to $906m respectively – versus the year-ago period.
Excluding items, Kraft earned $1 per share in the three months ended June 30, beating analysts’ estimate of 92 cents.
Put up prices
“Our results through the first half were stronger than the expectations we put forward as recently as three months ago, and we have been even more encouraged by our recent performance in the marketplace,” said CEO Bernardo Vierira Hees.
However – like most other packaged food companies – the Planters nuts maker has struggled in recent months to combat surging commodities and transportation costs, and has raised prices on all its items, except in Europe, the Middle East and Africa (EMEA).
During the earnings call, CFO David Knopf told analysts the higher costs had persisted for longer than expected, however, he added the company’s core earnings would gain momentum into 2019.
“We believe we are now in a position to drive sustainable top-line growth from a strong pipeline of new product, marketing, and [growth] initiatives that are backed by investments in capabilities for brand and category advantage,” said Hees.
Following its failed attempt to buy European food and consumer products conglomerate Unilever, analysts are waiting for Kraft to announce a major acquisition.
The company is controlled by private equity firm 3G and Warren Buffett’s Berkshire Hathaway, and 3G is known for engineering big mergers, such as the creation of Restaurant Brands International by combining Burger King with Canada’s Tim Hortons.
In June, the New York Post reported that Kraft – along with cereal maker General Mills – had a potential interest in Campbell Soup.
- Revenue was $6.7bn, up 1% from R6.6bn a year ago.
- Net income was $756m, down 35% from $1.2bn in Q2 2017.
- EPS was $0.62 in Q2 2018, versus $0.94 in the same period a year ago.
Last year, Campbell Soup acquired snack maker Snyder’s-Lance for $4.87bn, forming a new Campbell Snacks division to offset declining soup sales.
Last week, the paper again stated that Kraft was taking a “preliminary look” at buying the 149-year-old soup company.
Spokespersons for both companies have declined to comment, but, during the earnings call with analysts, Hees noted there will be more consolidation in the industry, adding that Kraft has never been shy about saying it will “want to be a force behind that when the process happens.”
However, there are signs that interest could be dwindling, with Hees noting, “We don't do something to be happy for a quarter and then be regretting for the long-term, to be apologizing for the next couple of years.”
Campbell Soup executives said it will announce its decision on Campbell’s future on August 30 when it releases its fourth-quarter earnings and annual results.