News briefs: Kraft, Heinz and Lotte

By Charlotte Eyre

- Last updated on GMT

Related tags: Danone, Japan, Generally accepted accounting principles

Heinz posts a nearly 10 per cent increase in operating profits;
Kraft finalises the acquisition of Danone's biscuit division; and
Korean company Lotte moves into the Japanese cake market.

Heinz posts Q2 profit increase ​US-based Heinz today posted increases in both sales and operating income for the quarter ending 31 October, despite commodity and marketing costs having an adverse effect on margins. According to the company, the popularity of Heinz brands in Europe, the US and the Asia Pacific region resulted in net sales of $2.5bn, a 13 per cent from the year before. Operating profit also increased 9.9 per cent to $420m; however margins decreased 0.4 percentage points to 16.7 per cent, blamed primarily on "the impact of higher commodity costs affecting the entire food industry." ​Looking forward, chief executive officer William Johnson said the company is on target to achieve growth in fiscal year 2008. "Heinz is driving strong operating income and managing commodity inflation with faster sales growth, strong net pricing, productivity gains, and currency tailwinds resulting from our unique international scale,"​ he said. Kraft completes Danone acquisition ​Global food giant Kraft last week said it had finalised the much talked about acquisition of Danone's bakery division, after the move was approved by the European Commission in November. Now that Kraft has acquired Danone brands such as Tuc and Lu, biscuits will generate 20 per cent of the company's global income, said Sanjay Khosla, president of Kraft International. The company now also has access to emerging markets all over the world. "Our business will nearly double in size in the fast-growingChinamarket,"​ Khosla said. "We will gain a foothold in bothIndonesiaandMalaysiafor faster expansion, and inRussia, our distribution strength, coupled with Danone's brands, will give us an even stronger presence." ​ The proposed €5.3bn sale of Danone's biscuit and cereals divisions, excluding its interests in Latin America and India, was announced in September. Danone, the France-based dairy group, is itself restructuring operations by acquiring nutrition firm Numico as part of moves to extend its presence in higher value and nutritional goods, aided, in part, by the proceeds of the Kraft acquisition. Lotte moves into Japanese cake industry ​Korea-based confectionery company Lotte is in the final stages of acquiring Japanese cake company Ginza Cozy Corner, according to Japan's Corporate News (JCN) network. The deal, estimated to be worth ¥20bn (€123.6m), would give the Lotte company 300 cake shops chiefly located in Tokyo's metropolitan area, JCN said. According to the network, confectionery and bakery companies in Japan started to consolidate in recent years, as a growing population has reduced the amount of sweets and cakes being bought by or for children. Lotte is currently one of the biggest food companies in the Asia Pacific region, with total net sales of ¥448.5bn in the tax ending March 2007. The company has manufacturing facilities in South Korea, China and Japan, and earlier this year it signed an agreement to help US company Hershey operate in the region.

Related topics: Kraft Foods, Markets

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