WASHINGTON (dpa-AFX) - Kraft Foods Group Inc (KRFT) on Wednesday reported a decline in profit for the third quarter, hurt by higher commodity costs that offset a marginal climb in sales, with weak operating margins pronounced at the cheese, and meals and desserts segments.
Kraft, which has been grappling with increased commodity costs, had raised prices, but that was not enough to arrest the slide in profit for the quarter.
Kraft like others in the packaged food industry is faced with higher commodity costs and stiff competition, amid a changing consumer environment. Kraft CEO Tony Vernon admitted that while Kraft's commodity-based pricing has been successful, the execution has been weak in other areas.
'A volume/mix decline of 1.2 percentage points reflected the impact of significant price increases in cheese, meats and coffee, as well as category softness in meals and desserts,' Kraft said.
Kraft, based in Northfield, Illinois, posted quarterly net earnings of $446 million or $0.74 a share, compared with $500 million or $0.83 a share last year.
Earnings for the quarter included a loss of $0.03 a share related to post-employment benefit plans, compared with a gain of $0.18 a share last year.
On average, 15 analysts polled by Thomson Reuters expected earnings of $0.74 a share for the quarter. Analysts' estimates typically exclude special items.
Sales for the third quarter rose 0.1 percent from last year to $4.40 billion. Twelve analysts had a consensus revenue estimate of $4.47 billion for the quarter.
Sales at the company's cheese segment rose 1.6 percent from the prior year, due mainly to higher price levels. Nevertheless, operating income at the segment fell 15.8 percent due mainly to higher input costs and lower volume/mix.
Refrigerated meals sales increased 3.4 percent, led by price increases and volume/mix gains. Beverages sales were up 0.5 percent compared with a year ago.
Meals and desserts sales slid 6.7 percent, hurt by weak demand and higher promotional costs, with operating income slipping 8.2 percent. Enhancers and snack nuts sales fell 2.5 percent.
Sales in Canada fell 4.2 percent due to unfavorable currency impact, and sales in other businesses gained 5.8 percent.
Cost of sales for the quarter increased 6.9 percent from last year.
Kraft in 2012 split from parent Kraft Foods Global Inc to focus on the North America food and beverage business, with the international snacks unit named Mondelez International Inc (MDLZ).
Kraft stock closed Wednesday at $56.91, down $0.34 or 0.59%, on a volume of 3.7 million shares on the Nasdaq. In after hours, the stock dropped $1.02 or 1.79% at $55.89.
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