Kraft says strong Q3 due to ‘powerful combination’ of new products and higher prices

03-Nov-2011 - Last updated on 03-Aug-2012 at 12:58 GMT

Kraft Foods has reported a 22% rise in net profits for the third quarter, citing higher prices, which offset increased commodity costs, and a spate of successful product introductions.

Sales were up 11.5% for the quarter, to $13.2bn, while net profits grew from $760m to $927m compared to the prior year period, the company said.

In a conference call with investors, CEO Irene Rosenfeld said: “Consumers are responding favorably to our investments in new products and in better and more effective advertising. This has been a powerful combination,” she said, which also allowed the company to pass higher costs on to consumers.

Kraft’s executive vice president and chief financial officer David Brearton told analysts during the call: “Several of our new product successes are truly redefining our categories. They include our new MiO liquid beverage mixes, which are on track to reach the $100 million mark in their first year; Oscar Mayer Lunchables with Fruit, which are driving record sales of our Lunchables franchise; and Velveeta Skillets, which are expanding our Dinners business by taking share in adjacent categories.”

The company also raised its guidance for full-year sales growth from 5% to 6%, and earnings per share from at least $2.25 to at least $2.27.

Brearton added: “We’ve raised our outlook for the year due to the strong business momentum in each of our geographies. While we expect strong operating momentum to continue, our earnings guidance excludes any potential impact from currency in the fourth quarter, as recent volatility has made such forecasts difficult.”

Many food manufacturers have been working to find ways to decrease costs and increase profits in the face of a challenging business environment, which includes higher commodity costs, and price-sensitive consumers.

“Our investments in marketing and new products continue to drive high quality growth and solid market shares. And we’ve accomplished this despite having taken significant price increases to offset record-high input costs,” Rosenfeld said.

Kraft Foods announced its intention to split into two separate companies in August, with one company focused on global snacks, and the other on the North American grocery market.

During the company’s Q3 conference call, Rosenfeld said the North American grocery company would retain the name Kraft Foods, while the name for the Global Snacks company would be put to a shareholder vote in May.