Kraft Foods 4Q profit more than triples, sales up

NORTHFIELD, Ill. (AP) — Kraft Foodssaid Tuesday its fourth-quarter profit more than tripled on strength in developing markets and continued benefits from its restructuring plan to focus more on its money-making products.

The food maker, which is buying British candy maker Cadbury, said it expects long-term earnings growth at the high end of its previous guidance.

Kraft (KFT), whose brands include Maxwell House, Oreo cookies and its namesake cheese, said profit surged to $710 million, or 48 cents a share, for the period ended Dec. 31. That's up from $178 million, or 12 cents a share, a year ago.

Analysts expected a smaller profit of 45 cents a share, according to Thomson Reuters.

Sales rose 3% to $11 billion, but missed Wall Street's $11.07 billion estimate. The rise was primarily due to currency exchange effects, the company said. A weaker dollar helped boost revenue by 3.2% in the quarter.

The company, based in Northfield, Illinois, continued to see falling sales in the U.S. in the fourth quarter. Shoppers are increasingly buying food from grocery stores rather than restaurants during the recession, but they're trading down to less expensive, store-label brands. That forces Kraft and other food makers to compete for market share by promoting brands and cutting prices. Lower pricing drove revenue down 1.2 percentage points in the quarter, much of it for lower dairy costs.

The U.S. cheese business' revenue fell 13.7%, largely on lower prices. The company matches its dairy prices to market costs, and those have been falling.

Revenue in the company's U.S. beverage business fell 1.9%, and the U.S. snacks business, which includes Ritz crackers and Oreos, saw its revenue fall 2.8%. Snack nuts revenue fell because of steep price competition.

A standout in the U.S. business was convenient meals, which includes frozen pizzas and other foods people eat as meals at home. Revenue there rose 3.9%.

With the U.S. business stagnant, the company is looking for growth overseas. Revenue in developing markets grew 10.4%. Both Latin America and Asia Pacific had double-digit revenue growth, with strength in brands such as Tang and Philadelphia cream cheese.

Europe also figures prominently in Kraft's growth plans. The company's $19.5 billion deal to buy chocolate and gum maker Cadbury is a way for Kraft to expand its reach in other markets. The move will create the world's largest candy company, with 40 major candy and gum brands and more than $50 billion in annual revenue, and greatly expand Kraft's share of that lucrative business.

In the fourth quarter, revenue in Europe fell 0.3%, largely on Kraft's shedding of unprofitable product lines there, particularly in coffee. Chocolate and cheese were strong, but biscuits were weak. Shoppers in Europe are also feeling pinched in the recession, so they're limiting their purchases.

For fiscal 2009, the company earned $3 billion, or $2.03 a share, up from $2.89 billion, or $1.90 a share, the year before. Revenue fell 3.7% to $40.39 billion. The effects of currency exchange caused the revenue decline.

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