Kraft results sweetened by Cadbury

US food giant Kraft has reported higher-than-expected first quarter profits boosted by its acquisition of Birmingham confectioner Cadbury.

Kraft said net profit was $937m (£590m) which compares with $827m in the same period last year.
Net revenue rose 25.3% to $12.3bn (£7.85bn) which it said reflected increased profit margins and successful brand-building across all its territories.

Chairman and chief executive Irene Rosenfeld said: “We delivered strong earnings in the quarter and the first half of the year, despite difficult conditions in many markets that tempered top-line growth.

“We’re making excellent progress on the Cadbury integration and expect to realise even greater synergies. In light of our strong earnings momentum, we will reinvest our 2010 upside to build our brands and to harmonise business practices.”

Ms Rosenfeld, who is due to visit Cadbury’s later this year, said her firm planned to boost earnings per share and build a strong platform for growth in 2011 and beyond.

The importance of the Cadbury acquisition is evidenced by the net revenue figures. Of the 25.3% Q2 increase, 22.8% is thought to be directly attributable to the chocolate maker.

However, the Kraft figures are as much to do with chewing gum as they are chocolate. It said there had been significant gains in both the US and Latin America from successful new product launches of Trident Layers, Stride Shift and DentynePure gum.

Within Europe, Cadbury revenue was flat in the quarter compared with the prior year. There was solid growth in the UK and France but this was offset by weak economic conditions in Southern Europe, especially in Spain and Greece, as well as the unfavorable impact of approximately one percentage point from earlier shipments of Easter products into the first quarter.

In the Emerging Markets, chocolate sales were strong, especially in India.

In outlook, Kraft said it had adjusted its net revenue expectations for 2010 to show growth of between 3-4%, down from earlier predictions of at least 4%.

It said the change in outlook reflected the normalising of Cadbury’s trade inventory practices as well as an aggressive promotional environment in certain US categories.

It also said it expected further synergies from the integration of Cadbury. More than 100 managers have walked away from the Bournville company following the takeover, although Kraft was keen to stress that a third of its top 50 executives were from the confectioner.

The company is under pressure to deliver strong results after it was criticised by investors in the US, including billionaire Warren Buffett, who said Kraft had paid too much for Cadbury. The £11.5bn acquisiton was completed in February.

• Cadbury’s set to launch Olympic campaign 
• Cadbury’s boosts Kraft Q1 results
• More on Kraft
• More on Cadbury