Kraft Foods Group, Inc. reported fourth quarter and full year results that reflected strong gains from operations.
"We made significant strides during our first full year as a public company," said Kraft CEO Tony Vernon, in a prepared statement. "Our focus on driving profitable growth while reinvesting in our brands and people has delivered solid results to date and will serve us well as we continue to remake Kraft into the best food and beverage company in North America."
Net revenues for the company grew 2.3 percent in the fourth quarter and declined 0.3 percent to $18.2 billion in 2013. Fourth quarter organic net revenues were up 3.2 percent driven by volume/mix gains of 4.0 percentage points that were partially offset by a negative 0.8 percentage point impact from lower pricing that primarily reflected lower costs for ingredients such as raw nuts and coffee beans.
Volume/mix gains reflected base business growth as well as a favorable impact of approximately 3 percentage points from comparisons with retail customer inventory reductions following the 2012 spin-off from Mondelez International. These gains were partially offset by approximately 1 percentage point from product line pruning.
Full year organic net revenues were flat versus the prior year. Volume/mix gains from base business growth were offset by product line pruning of approximately 1 percentage point and a 0.6 percentage point impact from lower pricing.
Operating income was $1.5 billion in Q4 and was up 71.9 percent to $4.6 billion in 2013.
Fourth quarter operating income included a $782 million benefit from market-based impacts to post-employment benefit plans primarily driven by higher discount rates and higher asset returns.
Excluding the market-based impacts to post-employment benefit plans, operating income increased more than 50 percent from a combination of lower spending on cost savings initiatives,4 volume/mix gains, favorable marketing costs related to program timing and productivity savings.
Full year operating income included a $1,561 million benefit from market-based impacts to post-employment benefit plans.
Excluding this benefit, operating income was up approximately 5 percent versus the prior year, despite the incremental costs of becoming a standalone public company. Significant overhead cost savings as well as gains from productivity and volume/mix more than offset a negative impact from pricing net of commodity costs and a double-digit increase in advertising.
Earnings per share (EPS) were $1.54 in Q4 and $4.51 in 2013. Fourth quarter EPS increased $1.39, including a $1.11 benefit from market-based impacts to post-employment benefit plans. EPS growth was also driven by gains from operations, lower spending on cost savings initiatives and a favorable change in unrealized gains/losses from hedging activities.
Full year EPS increased $1.76, including a $1.90 benefit from market-based impacts to post-employment benefit plans. Excluding this benefit, lower EPS versus the prior year was driven by strong gains from operations that were more than offset by higher interest expense. The higher interest expense in 2013 reflected a full year of Kraft's capital structure as an independent company.
Free Cash Flow was $1.5 billion in 2013.Free Cash Flow reflected improved management of inventory and payables as well as the impact of approximately $600 million in pension plan contributions. Full report.