Kraft Profit Up 3.7%; Plans to Sell Non-Core Businesses
Kraft Foods Chief Executive Irene Rosenfeld, under pressure from new investors, said Wednesday that the company is reviewing its businesses and will sell any unit that doesn't fit the company's current strategy.
Rosenfeld's comments came as the Northfield, Ill., food company reported its quarterly profit. Earnings rose 3.7%, helped by fewer restructuring charges, a lower tax rate and higher sales, which offset rising costs for milk, wheat and other ingredients.
The maker of products including Oreo cookies and Grey Poupon mustard said second-quarter profit was $707 million, or 44 cents a share, compared with $682 million, or 41 cents a share, a year earlier. Excluding one-time items, earnings were 50 cents a share.
That's stronger than analysts were expecting. On average, analysts estimated earnings would be 47 cents a share, according to Thomson Financial.
Revenue rose 6.8% to $9.21 billion, with 2.2 percentage points of the increase the result of the weaker dollar, which boosts the value of international sales when they are reported in dollars on the company's income statement.
Volume, a measure of products sold that factors out currency and price fluctuations, fell 0.7%. Kraft , which was spun off from Altria Group on March 30, has struggled with higher prices for ingredients and decling market share in products like frozen pizza and nuts.
But at the same time, the company has attracted high-profile activist investors Nelson Peltz and Carl Icahn, who both purchased stock in the company. Warren Buffett's Berkshire Hathawayalso is reported to have bought a stake.
According to CNBC's David Faber, Peltz plans to push the company to sell off underperforming businesses.
"We continue to evaluate our existing brands in the context of our new framework, and we'll divest those businesses that don't fit our long-term growth plan," Rosenfeld said during a conference call on second-quarter earnings.
Rosenfeld said she expects to sell businesses representing some 5% of the company's sales.
Separately, Kraft also is planning to expand its European business, having said in July that it is in exclusive talks to buy the cookies and cereal snacks business of Danone for $7.2 billion.
Kraft shares traded at $33.20 on Wednesday in premarket electronic trading. They closed Tuesday at $32.98 on the New York Stock Exchange and through Tuesday, the stock was down 8.3% this year, compared with a 1% increase for the Standard & Poor's packaged foods index.