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Kraft Foods and Kellogg have both reported stronger-than-expected growth for their most recent fiscal quarters, and issued positive forecasts for the rest of the year. However, neither of the global food giants raised their forecasts for the year, citing ongoing volatility.
For the quarter, Kraft saw its net revenue decline by 4.3% to $13.3bn, but excluding calendar and currency shifts, revenues were up 3.4%. Net profit rose by 5.4% to $1.03bn (58 cents a share), while operating profit grew by 4% to $1.88bn, with operating margin surging by 110bps to 14.1%.
The group said it was helped by price hikes, but also pointed to savings generated by better distribution internationally. Emerging markets were once again the driving force behind its results, with underlying sales up 7.6%, compared to a 1.2% rise in North America. Kraft also benefitted from demand for its so-called ‘Power Brands’, which reported a 6% rise in sales.
The group said the results were “on track with our previous annual guidance of organic net revenue growth of approximately 5% and operating EPS growth of at least 9% on a constant currency basis”. CEO Irene Rosenfeld added: “As we embark on our journey as two industry-leading, independent companies, I’m confident that both companies have the brands, the executional capability and the leadership teams to succeed in their respective missions.”
Meanwhile, cereals giant Kellogg saw its revenues rise by 2.4% to $3.47bn, helped by growth in North America. The group reported a 12% drop in net profit for the quarter, hurt by rising commodity costs, but underlying profit topped analysts’ estimates, sending its shares up.
In North America, revenue was up 5.9%, helped by demand for Pop-Tarts, frozen foods, and at its Canadian operations. The stronger dollar affected its International operations, resulting in a 3.8% sales decline for the quarter. Sales were down in the Asia/Pacific unit, hurt by weakness in Australia, and they also declined in Europe, although the drop was considerably smaller there than in the first quarter. The only international region to record growth was that of Latin America, which saw sales rise by 6.8%.
CEO John Bryant said the results proved that Kellogg was “getting back on track as a company”, noting that lowering prices in markets such as Europe had lured back consumers. He also downplayed fears of a drastic rise in corn prices, given growing fears of a drought in the US, saying the group was covered for this year's commodity purchases, so the impact of the drought will not be felt until 2013.
NamNews - Friday 3rd August 2012
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