Kraft Foods reports strong start to 2011

Kraft Foods, the world’s second largest food company, with plants in Egypt producing brands such as Cadbury Dairy Milk, Flake, SMS, Moro, Lunch Bar, Trident, Tuc, Tang, Halls and Clorets - has reported strong first quarter 2011 results for its global operation, driven by continued investments in marketing and innovation combined with aggressive cost management.

“Kraft Foods is a global leader in snacks, with an unrivaled portfolio of brands people love,” said Gawad Abaza, Kraft Foods Managing Director in Egypt.  “As the second-largest food company in the world, as well as the world’s largest confectioner, Kraft Foods proudly markets biscuits, confectionery, beverages, cheese, grocery products and convenient meals in approximately 170 countries, including many of these products in Egypt, Lebanon and Jordan”

“Cadbury had been present in Egypt since 1991 and is one of our Power Brands,” said Abaza. “Today, the joint operations of Kraft Foods Egypt with Cadbury include four manufacturing facilities: two in Tenth of Ramadan and two in Alexandria.”  

Most recently, Kraft Foods Egypt has invested in a production line for Flake chocolate. “The start of Flake production in Egypt is a testament to Kraft Foods growing business in Egypt and the Mashreq area,” said Abaza. “Flake chocolate requires a sophisticated technology to manufacture and exists only in 3 other countries worldwide. Egypt is the regional hub of Flake export in the region.”

Abaza adds, “We are the market leaders in Egypt in chocolate, gum and candy, while other categories are growing rapidly. Our four plants produce for both local consumption and regional export, and we are actively involved within the community in charity contributions.

Eleven of the company’s iconic brands - including Cadbury, Jacobs, Kraft, LU, Maxwell House, Milka, Nabisco, Oreo, Oscar Mayer, Philadelphia and Trident - generate revenue of more than $1 billion annually, and 40 have been loved for more than a century,” he added.

“We’re off to a stronger-than-anticipated start to the year as our teams around the world execute our growth strategy,” said Irene Rosenfeld, Chairman and CEO. “Our business fundamentals are solid, and we continue to benefit from brand-building investments which allowed us to successfully deliver net pricing to offset commodities increases and drive top-tier growth. At the same time, we’re generating cost savings to reinvest in further growth and expand margins.”

Global Net revenues for the first quarter were $12.6 billion. Organic Net Revenues grew 4.6 percent, driven by solid top-line growth in all regions. Pricing, which accounted for 3.7 percentage points of growth, was higher in each geographic region.

Operating income was $1.6 billion, and operating income margin was 13.1 percent. Underlying Operating Income, which excludes acquisition-related and Integration Program 

costs, grew 16.0 percent to $1.8 billion. Underlying Operating Income margin expanded 60 basis points versus the prior year to 13.9 percent.  Key drivers of margin expansion were lower SG&A, despite a significant increase in advertising and consumer (A&C) support, and the benefit of unrealized gains from hedging activities. Diluted earnings per share were $0.45. Operating EPS increased 6.1 percent to $0.52, driven by solid operating performance and unrealized gains from hedging activities. Earnings growth was tempered by the impact of higher shares outstanding and higher interest expense related to the February 2010 Cadbury acquisition.

Solid execution of Kraft Foods Developing Markets’ strategy, which focuses on 5 key categories, 10 priority markets and 10 Power Brands, continued to deliver strong operating results. Net revenues increased 24.0 percent. Organic Net Revenues grew 9.6 percent, driven by Power Brand growth of 16 percent. The Easter shift tempered growth by more than one-half percentage point. The Latin America and Asia Pacific regions each grew double-digits, while the CEEMA (Central & Eastern Europe, Middle East & Africa) region posted mid-single-digit growth despite weak economic conditions.

Segment operating income increased 12.8 percent, reflecting a positive impact of 12.5 percentage points from the Cadbury acquisition, net of Integration Program and acquisition-related costs, and a negative 1.5 percentage point impact from currency. Excluding these factors, segment operating income increased modestly as higher pricing and volume/mix gains more than offset higher input costs and a strong double-digit increase in A&C.