Kraft Foods Profit Falls as Sales Edge Lower

By Maria Armental 

Kraft Foods Inc.'s profit fell in the first quarter as sales edged down despite the packaged-food giant's price increases last year.

Kraft--home to supermarket mainstay brands such as Oscar Mayer, Maxwell House, and Velveeta--last year raised prices on some products, such as cheese and ground coffee, to offset higher commodities costs.

The Northfiled, Ill., company, which was spun off in 2012 from Mondel z International Inc., is now merging with H.J. Heinz Co.

The merger is expected to close in the second half of 2015 and would create the third-largest food and beverage company in North America, with about $28 billion in revenue, and is expected to result in about $1.5 billion in annual savings by the end of 2017.

For the most recent period, Kraft reported net profit of $429 million, or 72 cents a share, down from $513 million, or 85 cents a share, a year earlier. The latest period included a 14-cent-a-share impact tied to benefit plans, cost-cutting initiatives and the pending merger with Heinz.

Revenue edged down 0.2% to $4.35 billion. Organic net revenue--which excludes the impact of transactions with Mondel z, acquisitions, divestitures and currency impacts--rose 1.1%.

Analysts surveyed by Thomson Reuters expected a profit of 81 cents and revenue of $4.43 billion.

Revenue at the beverages segment rose 4.2% to $702 million, benefiting from higher prices and the recent launch of McCafé coffee, while operating income fell 6% on higher commodity costs.

Cheese segment revenue rose 1.3% to $1.02 billion, benefiting from the higher prices and timing of Easter-related shipments along with higher sales of last year's relaunched Philadelphia soft cream cheese to remove artificial ingredients. Operating income rose nearly 20%, largely due to the higher prices offsetting input costs.

Refrigerated-meals business revenue improved 2.1% to $833 million, while operating income improved 1%.

Revenue at the meals and desserts unit fell 2% to $488 million, reflecting market share losses in desserts despite higher marketing expenses, while operating income decreased 7%.

Write to Maria Armental at [e-mail]

Access Investor Kit for Berkshire Hathaway, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0846701086

Access Investor Kit for Berkshire Hathaway, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0846707026

Access Investor Kit for Mondelez International, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US6092071058

Subscribe to WSJ: http://online.wsj.com?mod=djnwires