Kraft Foods 3Q Earnings Up by 22%

Kraft Foods Inc (NYSE:KFT) on Wednesday reported a 22 percent jump in profits for the third fiscal quarter that ended September 30, boosted by hefty price increases on some products to counterbalance a 14% increase in costs of raw materials.

Kraft Foods is managing with higher costs during an era when consumers in urbanized markets like the United States are restraining their spending. The company has been successful to offset this pressure by increasing prices on some of its selected products and expanding in potential markets such as India, Brazil and China where demands are briskly increasing.

Irene Rosenfeld, Chairman and Chief Executive of Kraft Foods, said that the marketing division has seen a steady increase to promote its brands along with new lines of products. This has helped both the customers and retailers to adapt to the increased prices.

Rosenfeld in an earnings call conference on Wednesday said that this has been a strong combination and has enabled the company to make the necessary pricing of products to offset surprising raw material cost increases.

Kraft Foods reported that it earned $922 million or 52 cents per share in the third fiscal quarter that ended September 30, following the market close. The earnings are up by $754 million or 43 cents per share in the same quarter last year. The company’s third quarter profit and sales both exceeded Wall Street expectations. Kraft’s revenue rose around 12 percent to $13.23 billion.

The processed food giant also did disclose few details about its pending split into a snack company worldwide to benefit from the growth opportunities for Trident gum, Oreo cookies and Cadbury. The company also plans for a North American grocery business that will concentrate entirely on sales of staples like cheese and Maxwell house coffee, which have increased margins. The split is expected to happen by the end of this year.

Kraft’s revenue in Europe rose more than 16%, driven by increased price on coffee and stronger sales. However the standout in the third quarter was in developing markets like Brazil and India, where Kraft’s revenue rose over 20 percent.

Kraft also lifted its net income outlook for the full year 2011. The company mow is anticipating earnings of $2.27 per share, meeting average analyst forecasts and up from a prior forecast of $2.25 per share. Revenue at Kraft is expected to rise by 6%, up from a prior forecast of 5% rise. Kraft has price hike plans for the fourth quarter but is waiting to see the change in commodity prices before making any price hike plans in 2012.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.