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News briefs: Kraft Foods and Fonterra

By Neil Merrett , 30-Apr-2008

This week, Kraft posts a slight rise in first quarter sales, while Fonterra gets Vatican approval to expand its presence in South America.

Kraft targets profit push

 

 

Kraft Foods has posted an 8 per cent organic increase in sales for the first fiscal quarter, amounting to $10.3bn (€6.6bn).

 

 

 

Operating profit for the three-month period ending 31 March was up by 3.8 per cent on an organic basis to $1.16bn (€746m), as the group moved to step up innovation within its portfolio of products like cheeses and biscuits to offset higher input costs.

 

 

 

Company chief executive officer Irene Rosenfeld said the quarter reflected a strong start to the financial year for the group, as it looked to step up its investment in product quality and new products ranges.

 

 

 

"Our newly-acquired international biscuit business is performing well and integration is on track," she said.

 

 

 

"While input costs remain high, I am confident that our ongoing programs to lower overhead costs and invest in our brands will enable us to deliver our targeted earnings in 2008 and beyond."

 

 

In terms of segment growth, Kraft said that it had posted an 8.8 per cent improvement in its US-based cheese business on the back of what it called significant price mixes, despite lower sales volumes during the period.

 

 

 

Despite a fall in natural cheese volumes on the back of this increased pricing, product innovation like its LiveActive snacking range and Singles Select processed cheese slices.

 

 

 

Operating income for the segment nonetheless fell over the period by 23.8 per cent, partly in response to a 30 per cent increase in dairy ingredient costs, the company said.

 

 

 

In terms of its beverage operations, revenues rose 2.4 per cent due to the strength of the company's coffee brands, which helped offset a decline in its ready-to drink segment.

 

 

 

Operating income rose by 7 per cent during the period due to prince increases, according to Kraft.

 

 

 

Sales of the companies convenient meals brands were also up for the quarter, rising 7.5 per cent on the back of increased pricing and higher sales volumes.

 

 

 

Operating income improved by 2.5 per cent for the company as brands like its Oscar Mayer Deli Fresh and California Pizza Kitchen continued to grow.

 

 

 

In terms of its snack and cereal operations, Kraft said sales revenues were up by 2.7 per cent on the back of its recently acquired biscuit operations from multinational rival Danone.

 

 

 

The group added that product innovation has been particularly important over the period, with products like Oreo Cakesters and Oreo snack 'n seal reclosable packaging further adding to the group's coffers.

 

 

 

Operating profit for the segment was ultimately down though by 22.6 per cent as the costs of gains and oils continued to take their toll financially, the company said.

 

 

 

Vatican approves Fonterra deal

 

 

New Zealand-based dairy group Fonterra, a leading exporter and supplier of dairy products, is to purchase an additional 42.6 per cent stake within the Chilean dairy group Soprole from a charitable foundation run under Canonical law.

 

 

 

By extending its current 56.85 per cent stake, after having obtained Vatican approval for the deal, Fonterra chief executive Andrew Ferrier said the company would be well position to tackle further growth in the country.

 

 

 

"Soprole has been a strong performer for Fonterra over the years," he said. "By increasing our ownership, we will be able to build on this and look at ways we can grow the business even further."

 

 

Ferrier added that the company would look to continue to focus on product innovation to meet dairy demand within the markets of South America.

 

 

 

"Soprole is an example of Fonterra's strategies of leveraging its cow-to-consumer expertise to build profitable businesses, and also securing new sources of fresh milk around the world," he said.

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