Segment operating income increased 3.1 percent, including a negative 5.9 percentage point impact from restructuring program costs net of lower integration program costs versus the prior year. Excluding these factors, adjusted segment operating income increased high single digits, reflecting strong gains from pricing and productivity that more than offset the impact of higher raw material costs and lower volume/mix.
Kraft Foods Europe drove strong underlying growth in an increasingly difficult macroeconomic environment by focusing on Power Brands, driving productivity gains and aggressively managing overhead costs.
Net revenues in the second quarter decreased 14.8 percent, including negative impacts of 8.4 percentage points from currency and 7.8 percentage points from accounting calendar changes. Organic net revenues increased 1.4 percent, driven by the favorable carryover impact of pricing actions. Volume/mix declined 1.1 percentage points, including the negative impact of approximately 2 percentage points from the Easter shift. Power Brands grew 3 percent.
Segment operating income declined 4.6 percent, including negative impacts of 9.0 percentage points from accounting calendar changes and 8.3 percentage points from currency, and a favorable 8.1 percentage point impact from lower integration program costs versus the prior year. Excluding these factors, Europe's segment operating income grew as favorable pricing and productivity gains more than offset higher raw material costs and a strong increase in A&C support behind Power Brands.
In developing markets, focused investments in Power Brands, expanded distribution capabilities and significant productivity efforts enabled Kraft Foods developing markets to deliver solid organic revenue and segment operating income growth. Broad geographic diversity helped overcome challenging macroeconomic conditions in certain key countries.
Net revenues in the second quarter decreased 3.6 percent, including negative impacts of 8.7 percentage points from currency and 2.5 percentage points from accounting calendar changes. Organic net revenues grew 7.6 percent, driven by a balance of higher pricing and volume/mix gains, including a negative impact of approximately 1 percentage point from the Easter shift. Power Brands grew more than 8 percent.
Segment operating income increased 5.0 percent, including a positive 6.0 percentage point impact from lower integration program costs (net of restructuring program costs) versus the prior year and a negative 7.6 percentage point impact from currency. In addition, accounting calendar changes negatively affected growth by nearly 2 percentage points. Excluding these factors, effective cost management and volume/mix gains drove segment operating income growth. This was partially offset by higher SG&A, including a strong increase in A&C support.
"Our first half results are on-track with our previous annual guidance of Organic Net Revenue growth of approximately 5 percent and Operating EPS growth of at least 9 percent on a constant currency basis," said David Brearton, executive vice president and CFO. "As we look forward, we're confident that we're launching two industry-leading companies, each with a great future."
The company intends to spin-off to its shareholders its North American grocery business, Kraft Foods Group, Inc. The spin-off is expected to occur at 5 p.m. EDT on Oct. 1, 2012. The final effective date and terms of the spin-off of Kraft Foods Group are subject to the approval by the Kraft Foods Inc. board of directors and satisfaction or waiver of other conditions.
At the time of the spin-off, each of the company's shareholders entitled to receive shares of Kraft Foods Group will receive one share of Kraft Foods Group for every three shares of Kraft Foods Inc. The record date is not yet finalized, but is expected to be in mid-September. The company expects the common stock for both companies to begin to trade on a "when-issued" basis shortly before the record date.
Beginning Oct. 2, 2012, Kraft Foods Group will begin to trade on The NASDAQ Global Select Market under the ticker symbol "KRFT." Kraft Foods Inc. will change its name to Mondelez International, Inc. and change its ticker symbol to "MDLZ." The current ticker symbol, "KFT," will be retired.
Both Kraft Foods Group and Mondelez International plan to host investor events in early September. The company will announce details for these events by mid-August.