May 6, 2010, 7:04 p.m. EDT
SAN FRANCISCO (MarketWatch) -- Kraft Foods, maker of Oscar Mayer deli meats and Oreo cookies, reported Thursday first-quarter net income leaped from a year ago as it sold its frozen pizza business, acquired chocolate maker Cadbury, and grew sales.
The world's second-largest food company reported net income was $1.88 billion, or $1.16 a share, compared with net income of $660 million, or 45 cents a share, in the year-earlier period. Sales rose 26% to $11.3 billion.
Gross profit margin rose to 36.1% of sales from 34.5%.
Excluding items, Kraft (KFT 29.21, -0.54, -1.82%) said it earned 49 cents a share.
Analysts polled by FactSet Research had forecast the food maker to earn 43 cents a share on sales of $10.98 billion.
Top priorities for Kraft are jumpstarting volume, regaining market share, and integrating Cadbury into its operations. Over the last year, Kraft has struggled with consumers buying cheaper store brands and heavy promotional activity at food retailers.
Kraft turned its best volume growth in at least one year during the quarter ended March 31. Volumes rose 3.1% in the company's base business that excludes Cadbury.
ReutersKraft Chief Executive Officer Irene Rosenfeld is out to prove her $19 billion deal for Cadbury was worth the hefty price.
"Our first quarter results are early evidence of our future potential in combination with Cadbury," Rosenfeld said in a prepared statement.
The deal gives Kraft a larger platform to grow in India, China, and Brazil, as well as higher-margin chocolate and gum products. More than 25% of Kraft sales will now come from faster-growing emerging markets.
Warren Buffett, whose Berkshire Hathaway is Kraft's largest shareholder, has been critical of the rich price tag Kraft paid for Cadbury and Kraft's decision to sell its fast-growing DiGiorno and Tombstone pizza business to Nestle. The pizza sale was done to help fund the acquisition of Cadbury. He also wasn't a fan of the $26 million in total compensation Rosenfeld earned in 2009.
Kraft on Thursday reiterated its shorter-term and longer range financial targets.
In the near term, the company targeted earnings growth of 7% to 8% and organic sales of 4%. For 2010, Kraft said profit will be at least $2.35 a share.
Longer-term, once Cadbury is integrated, Kraft has pledged the company can grow earnings 9% to 11% each year and boost organic sales by 5% or more. Kraft expects to cut $675 million in costs from the Cadbury deal. All those savings will kick in by 2013.
Kraft said it will probably hold the line on pricing as it deals with a promotional environment at food retailers. It also expects to spend more money supporting its brands through advertising campaigns and promotion deals with retailers.
Kraft shares closed Thursday down 2% at $29.21. The stock is up 7% for the year compared to the 1% gain for the Dow Jones Industrial Average.
Matt Andrejczak is a reporter for MarketWatch in San Francisco.
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