Kraft Foods Group, Inc. updated its financial outlook for fourth quarter 2012 and full year 2013. Fourth quarter results will reflect the impact of greater-than-anticipated trade inventory reductions, offset by strong gains from cost-savings measures. The company also announced a new, comprehensive strategy for post-employment benefits designed to improve transparency, simplify accounting, and reduce funding volatility.
"We continue to make important changes to re-make Kraft into an industry leader that delivers steady, growing shareholder returns," Tony Vernon, CEO of Kraft said in a prepared statement. "While we weren't satisfied with our revenue in the fourth quarter, our innovation, productivity and overhead cost reduction programs are paying off. This enabled a double-digit increase in advertising, solid profit from operations and sizable cash flow. We're off to a strong start so far this year and we remain well-positioned to drive profitable growth in 2013 and beyond."
Fourth quarter 2012 results update
Fourth quarter 2012 net revenue is expected to be 10.7 percent lower than the prior year; lapping 9.2 percent growth in fourth quarter 2011. The decline includes a negative impact of 4.2 percentage points due to a 53rd week of sales in the prior year as well as a 0.7 percentage point positive net impact from currency and sales to Mondelez International, Inc.
Organic net revenue is expected to have declined 7.2 percent versus the prior year quarter, lapping 7.8 percent Organic net revenue growth in fourth quarter 2011. The decline was due to a negative 6.8 percentage point impact from reductions in trade inventories, as well as a 1.2 percentage point impact from product pruning.
Fourth quarter operating income is expected to be approximately $260 million including a negative impact of approximately $225 million of market-based impacts from post-employment benefits as well as approximately $135 million of Restructuring Program charges and $46 million of unrealized losses from hedging activities.
Excluding these factors, the company expects to report solid gains from operations versus the prior year quarter. The gains from operations will reflect a reduction in ongoing post-employment benefit costs together with strong gains from productivity and overhead cost reductions that more than offset the impact of lower sales volumes due to retail trade destocking, incremental costs of being an independent public company and a double-digit increase in advertising investment.
The company expects to report earnings of approximately $0.15 per diluted share in fourth quarter 2012 including a one-time, non-cash charge of approximately $0.24 per share due to the market-based impact from post-employment benefits, approximately $0.14 per share of Restructuring program charges and $0.04 per share of unrealized losses from hedging activities.
The company expects to report final 2012 results, including gross profit; selling, general and administrative expenses (SG&A); and segment operating income details, as well as updated historical financial results reflecting the post-employment benefit changes for 2011 and 2010 no later than March 29, 2013.