By Duane D. Stanford
May 5 (Bloomberg) -- Kraft Foods Inc., the world’s second- largest foodmaker, said first-quarter profit gained 10 percent on price increases and cost savings.
Net income advanced to $660 million, or 45 cents a share, from $599 million, or 39 cents, a year earlier, Northfield, Illinois-based Kraft said today in a statement. Earnings exceeded analysts’ projections by 5 cents, according to the average of estimates compiled by Bloomberg.
Chief Executive Officer Irene Rosenfeld boosted profit by bringing prices in line with higher commodity costs, eliminating underperforming product lines and slashing at least $1.1 billion in annual expenses. Kraft, which makes macaroni and cheese dinners and Oreo cookies, said the amount of product sold fell 2 percent, compared with a February forecast for a drop of as much as 5 percent.
“We are heartened that convenient meals and grocery turned in strong performances,” David Palmer, an analyst with UBS AG in New York who rates the stock “neutral,” said today in a note. “These should be Kraft’s strengths in difficult economic times.”
Kraft, whose largest shareholder is billionaire Warren Buffett’s Berkshire Hathaway Inc., gained $1.61, or 6.6 percent, to $25.87 at 11:08 a.m. in New York Stock Exchange composite trading. The stock had dropped 9.6 percent this year before today.
At Kraft’s U.S. convenient meals, sales rose 8.2 percent, excluding the impact of acquisitions and divestitures, driven by sales of DiGiorno frozen pizza and Oscar Mayer meats. The U.S. grocery unit’s sales grew 3.3 percent, helped by higher prices and volume for Kraft macaroni and cheese dinners.
“We’re seeing a return to normalcy with respect to pricing but we now are finding ourselves smack in the middle of a challenging macro-economic environment,” Rosenfeld said today in an interview.
Kraft, which also sells Single Select cheese slices and Kool-Aid drink mixes, reiterated that 2009 earnings will fall to $1.88 a share, in part because of “extremely weak” consumer demand, Rosenfeld said during the conference call. Earnings were $1.90 a share in 2008.
First-quarter revenue for the maker of Philadelphia cream cheese dropped 6.5 percent to $9.4 billion from $10 billion, hurt by the stronger dollar.
Kraft discontinued its Handi-Snacks line of puddings and Kool-Aid gels in the U.S. in December after sales fell by more than a third since 2005, Michael Mitchell, a company spokesman, said today in an e-mail.
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