Kraft Foods Group, Inc. reported second quarter results that reflected continued gains from productivity and overhead savings. Net revenues in the second quarter declined 1.1 percent to $4.7 billion. Organic net revenues declined 1.2 percent from lower volume/mix of 0.9 percentage points and 0.3 percentage points due to lower pricing. The timing of Easter shipments negatively impacted net revenue growth between 0.5 and 1.0 percentage points while product line pruning negatively impacted growth by approximately 1.0 percentage point.
Operating income in the second quarter increased 53.5 percent to $1.4 billion. Results included a $604 million benefit from market-based impacts to post-employment benefit plans driven by higher discount rates and higher asset returns. Implementation of a voluntary early retirement program triggered a mid-year remeasurement of select pension plans. Excluding the market-based impacts to post-employment benefit plans, gains from productivity and overhead cost savings were more than offset by a combination of increased marketing expenses, the impact of lower volume and higher restructuring program costs versus the prior year quarter.
Earnings per share in the second quarter were $1.38. Results included a $0.62 benefit from market-based impacts to post-employment benefit plans. Second quarter results also included $0.09 per share of restructuring program costs. Interest expense in the quarter was $130 million or approximately $0.14 per share, reflecting the company's capital structure as an independent company.
Free Cash Flow was $399 million year-to-date and continued to pace ahead of expectations due to improved working capital management.
"We continue to make meaningful progress on cost savings, cash flow, market share and building our brands for the long term," said Tony Vernon, CEO of Kraft in a prepared statement. "Our brand investments and top-line growth in the second quarter were held back by the return discipline we're applying to marketing, promotion and innovation. We expect to see profitable growth from a stronger base going forward and greater revenue growth in subsequent quarters as more new initiatives come to market."
