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Kraft Foods profit falls 33 percent

Kraft Foods Inc. Monday said first-quarter profit fell 33 percent, hurt by restructuring costs, an asset impairment charge, and higher marketing expenses.
/ Source: Reuters

Kraft Foods Inc., the largest North American food company, Monday said first-quarter profit fell 33 percent, hurt by restructuring costs and higher marketing expenses.

The maker of Velveeta cheese spread, Oscar Mayer meats and Nabisco Oreo cookies also warned that higher commodity, marketing and pension costs would keep its profit for the year at the low end of the company’s own forecast.

Kraft, based in Northfield, Illinois, said net income for the quarter ended March 31 fell to $560 million, or 33 cents a share, from $848 million, or 49 cents, in the year-ago period.

The results included a hit of 12 cents per share for restructuring costs and an asset impairment charge. Excluding that impact, the company would have earned 45 cents per share.

Wall Street analysts, on average, had been expecting the company to report earnings of 43 cents per share, according to Reuters Research, a unit of Reuters Plc.

“It looks like it’s in line with our estimates,” said D.A. Davidson & Co. analyst Tim Ramey.

Kraft is in the midst of a major restructuring spearheaded by Chief Executive Roger Deromedi. In January, the company announced the layoff of some 6,000 workers and the closure of about 20 plants, actions aimed at turning around its weakening North American position in product categories such as Nabisco cookies and Kraft cheese.

Kraft last Tuesday broke a two-week silence when it said Deromedi was returning to work May 10 after being diagnosed with a viral infection accompanied by acute dehydration.

During Deromedi’s absence, Kraft Chairman Louis Camilleri has assumed leadership of the company.

Net revenue for the quarter rose 4.5 percent to $7.7 billion, helped by the impact of a weaker dollar. Total reported volume was up 0.5 percent.

Looking ahead, Kraft said it expects its earnings for the year to come in at the low end of a previously announced range of $1.63 per share to $1.70 per share. The forecast includes an impact of 30 cents per share from restructuring costs and asset impairment charges.

Excluding that impact, the company said its forecast is in line with analysts’ average estimate of $1.94 per share.