By Maria Armental
Kraft Foods Inc.'s profit fell in the first quarter as sales
edged down despite price increases last year, underlining the
packaged-food giant's challenges ahead of its pending merger with
H.J. Heinz Co.
Kraft--home to supermarket mainstay brands such as Oscar Mayer,
Maxwell House, and Velveeta--last year raised prices on some
products, such as cheese and ground coffee, to offset higher
commodities costs.
The Northfield, Ill., company was spun off in 2012 from Mondelez
International Inc.
Its merger with Heinz is expected to close in the second half of
2015 and would create the third-largest food and beverage company
in North America, with about $28 billion in revenue, and is
expected to result in about $1.5 billion in annual savings by the
end of 2017.
For the most recent period, Kraft reported net profit of $429
million, or 72 cents a share, down from $513 million, or 85 cents a
share, a year earlier. The latest period included a 14-cent-a-share
impact tied to benefit plans, cost-cutting initiatives and the
pending merger with Heinz.
Revenue edged down 0.2% to $4.35 billion. Organic net
revenue--which excludes the impact of transactions with Mondelez,
acquisitions, divestitures and currency impacts--rose 1.1%.
Analysts surveyed by Thomson Reuters expected a profit of 81
cents and revenue of $4.43 billion.
Revenue at the beverages segment rose 4.2% to $702 million,
benefiting from higher prices and the recent launch of McCafé
coffee, while operating income fell 6% on higher commodity
costs.
Cheese segment revenue rose 1.3% to $1.02 billion, benefiting
from the higher prices and timing of Easter-related shipments along
with higher sales of last year's relaunched Philadelphia soft cream
cheese to remove artificial ingredients. Operating income rose
nearly 20%, largely due to the higher prices offsetting input
costs.
Refrigerated-meals business revenue improved 2.1% to $833
million, while operating income improved 1%.
Revenue at the meals and desserts unit fell 2% to $488 million,
reflecting market share losses in desserts despite higher marketing
expenses, while operating income decreased 7%.
Write to Maria Armental at maria.armental@wsj.com
Corrections & Amplifications
Kraft Foods is headquartered in Northfield, Ill. An earlier
version of this article misspelled the name of the town.
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