America's biggest food company, Kraft Foods, announced a rise of 20 per cent in earnings for the 2002 first quarter, attributing strong volume growth in beverages, desserts and new products to the increased earnings.
The company reported earnings of $802 million (€906m), or 46 cents a share, in the period ended March 31, compared with $670 million, or 39 cents a share, a year earlier.
The results, which beat Wall Street's average expectations of 44 cents a share, assume that stock issued after Kraft's initial public offering on 13 June was outstanding since 1 January and that net proceeds were used to pay down debt related to its acquisition of biscuit manufacturer Nabisco in late 2000.
"Versus expectations, (earnings were) a little light on the top line, but a little heavy on the bottom line," said Prudential Securities analyst John McMillin. "It was a good margin quarter but the top-line volume growth of 2.5 percent is below the 3 percent to 4 percent annual target," he added.
Kraft's worldwide volume gain of 2.5 per cent was driven by strong performance in products such as Capri Sun drinks in larger packages, Crystal Light drinks in bottles, Cool Whip frozen topping and Jell-O dry packaged and ready-to-eat desserts.
Revenue declined 0.4 percent to $7.15 billion from $7.18 billion, pulled down by weak foreign currencies and lower retail coffee prices, which were adjusted in response to lower commodity costs, Kraft said. Excluding the currency impact, Kraft said net revenue would have risen 1.4 per cent.
The company continues to expect full-year 2002 earnings of $2 to $2.05 a share, a 14 percent to 16 percent increase over 2001. It also sees full-year volume rising 3 per cent to 4 per cent, with acceleration coming in the second half of the year.
"It's the timing of our new product introductions and also the marketing ideas and marketing innovation," Kraft Co-Chief Executive Betsy Holden told Reuters, about the company's volume growth expectations.
Internationally, Kraft is rolling out new products such as ready-to-drink coffee in cans in several European markets.
Kraft's North American business, which accounts for about three-fourths of its sales, saw volume rise 2.5 percent. Kraft's international volume rose 2.5 percent. The Europe/Middle East/Africa unit led the gain, posting an increase of 3.6 percent, with improvement in snacks, convenient meals and beverages outweighing a decline in the European cheese business, whose volume fell amid price competition.
Volume in the Latin America/Asia Pacific business grew 1.1 percent, held back in part by difficult economies in Argentina and Venezuela.
Shares of Kraft fell 54 cents, or 1.3 per cent in Tuesday New York Stock Exchange trade to close at $39.91 before the release of the results.