Kraft Foods Records 30% Fall in Q1 Profit

Kraft Foods, the largest food and drinks group in the US, has reported a 30% decrease in quarterly profit due to increased spend on growth initiatives. However, sales grew 5.7%, helped by acquisitions and a weak dollar.

Kraft, which makes Oscar Mayer meats, Oreo cookies and Maxwell House coffee, recorded first quarter profit of $702 million, or $0.43 per share, compared to over $1 billion, or $0.61 per share, in 2006. During the first quarter 2007, the company said it incurred $0.03 per share in asset impairment, exit and implementation costs against its cost restructuring program.

At the end of the first quarter, Kraft became independent of Altria, its former parent. Irene Rosenfeld, chairman and CEO, said: “The first quarter of 2007 was an eventful one for Kraft as we became independent from Altria and began executing the strategic plan we announced in February.”

The company reported a 5.7% increase in sales, which was mostly attributable to a 1.2% rise from the United Biscuits Iberia acquisition and a favorable 2.1% impact from a weak dollar during the first quarter. Organic sales grew by only 3.6%, reflecting volume growth of 1.2%, led by North America snacks, cereals and convenient meals.

Ms Rosenfeld added: “While our first quarter results reflect improvement in several core categories, we still face many challenges. We expect to see further progress, particularly in the second half of the year, as we set the stage for Kraft’s return to consistent growth.”

Kraft’s 2007 outlook remained unchanged, and still expects earnings per share in the $1.50 to $1.55 range, including restructuring charges.