Cadbury helps Kraft to unwrap sweet first quarter profit

By Mike Stones

- Last updated on GMT

Related tags Revenue Kraft foods Generally accepted accounting principles Cadbury

Food giant Kraft’s acquisition of UK confectionery company Cadbury in February 2010 helped the firm to a better-than-expected first quarter net profit of $937m (£590m), up from $827m in the same period a year earlier.

Reflecting the Cadbury acquisition, net revenue rose 25.3 per cent to $12.3bn. The figures included a favourable impact of 22.8 per cent from the Cadbury acquisition, 0.8 per cent from currency and a negative 0.3 per cent impact from divestitures, according to Kraft.

Operating income rose 16.8 per cent to $1,701m, including a favourable impact of 17.8 per cent from Cadbury's operations. That was partially offset by a negative 11 per cent impact arising from the integration programme and acquisition-related costs.

Irene Rosenfeld, Kraft chairman and chief executive, said: "Our first quarter results are early evidence of our future potential in combination with Cadbury."

Operating gains

"We demonstrated strong momentum in our Kraft Foods' base business, including high-quality top-line growth and strong operating gains. In addition, our Cadbury business delivered solid financial results."

Cadbury’s first-quarter revenue was flat compared with the previous year. Solid growth in Britain and France was offset by weak economic conditions in Southern Europe, especially in Spain and Greece, said the company. Also there was a negative impact of about one per cent arising from earlier shipments of Easter products into the first quarter.

Kraft Foods Europe’s net revenues increased 34.1 per cent, including a 31.8 per cent contribution from Cadbury. Currency factors had a negative impact of 2.6 per cent.

Chocolate grew low-single digits due to volume/mix gains, partially offset by lower price levels,”​ according to a company statement. “Strong in-store marketing activities and continued momentum drove growth in Milka, Freia, Marabou and Toblerone.”

But the firm’s biscuit business showed double-digit growth due to volume/mix gains and the accounting calendar change. Marketing support behind priority brands plus launches of Cote D'Or in Belgium and Oreo in France also helped to drive growth.

Top 50 executives

Rosenfeld reported that the integration of Cadbury into Kraft’s business was progressing well and that about one third of Kraft's top 50 executives are from the UK confectionery company.

The take over should lead to even greater synergies later in the year, predicted the company. “In light of our strong earnings momentum, we will reinvest our 2010 upside to build our brands and to harmonize business practices,”​ pledged Rosenfeld.

Meanwhile, Kraft Foods North America reported net revenues up 6.3 per cent, including a 6.9 per cent contribution from Cadbury and 1.6 per cent benefit from currency factors.

In the company’s developing markets, net revenues increased 73.4 per cent aided by a 61.4 per cent impact from the Cadbury acquisition.

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