Kraft Foods Inc. reported third quarter results driven by strong organic revenue growth and operating income gains in each geographic region.
"Our investments in marketing and new products continue to drive high quality growth and solid market shares. And we've accomplished this despite having taken significant price increases to offset record-high input costs," said Irene Rosenfeld, chairman and CEO in a prepared statement. "Together with substantial savings opportunities, we expect to deliver top-tier results in 2011 and remain on track to launch two industry-leading companies with strong operating momentum in the coming year."
Net revenues for the third quarter were $13.2 billion, up 11.5 percent. Organic net revenues grew 8.4 percent, driven by strong growth in all geographies. Pricing contributed 7.0 percentage points of growth as the company continued to successfully implement pricing actions to recover higher input costs. Despite these pricing actions, volume/mix contributed 1.4 percentage points to growth.
Operating income was $1.7 billion, and operating income margin was 12.8 percent. Underlying operating income, which excludes acquisition-related and integration program costs, grew 12.2 percent to $1.8 billion. The increase in underlying operating income was driven by effective management of input costs through pricing and productivity, favorable foreign currency and growth from volume/mix. These gains were partially offset by the negative impacts from the Starbucks CPG business and the timing of SG&A expenses. While profit growth was strong, underlying operating income margin increased only 10 basis points due to the impact of the higher revenue base (from pricing) on the margin calculation.
Diluted earnings per share were $0.52. Operating EPS increased 23.4 percent to $0.58 driven by operating gains, favorable foreign currency and discrete tax items.
Improved marketing and successful new products enabled the continued implementation of broad-based pricing, while a strong focus on cost management drove operating income growth in Kraft Foods North America.
Net revenues increased 4.4 percent. Organic Net Revenues increased 5.9 percent, led by higher pricing across each business segment and contributions from new products. Volume/mix was modestly lower, but in line with the company's expectations.
Segment operating income increased 3.3 percent, including a negative 3.6 percentage point impact from the Starbucks CPG business and a negative 0.5 percentage point impact from Integration Program costs. Excluding these factors, strong growth in segment operating income reflected effective management of input costs and lower SG&A that was partially offset by lower volume/mix.