Kraft, Kellogg post better-than-expected results

CHICAGO (Reuters) - Kraft Foods Inc (KFT.N) and Kellogg Co (K.N) posted better-than-expected third-quarter profits on Wednesday as price increases and new products helped lift sales in a weak economy.

Kraft also stood by its forecasts for 2008 earnings before one-time items as well as for 2009 net income, while Kellogg said its profit this year should hit the high end of its previous targeted range.

Both Kraft, the largest North American food maker, and Kellogg, the world's largest cereal company, have taken steps to cut costs and put more money into advertising. Both have also bolstered new product development to attract consumers even as rising commodity costs pushed them to raise prices.

Commodities like wheat and energy have become less expensive in recent months, but food companies may not see a big benefit until next year, in part because they lock in their costs months ahead.

Kraft, which makes Oreo cookies, Tang breakfast drink and Oscar Mayer hot dogs, reported a profit of 45 cents a share before one-time items, a penny above what analysts polled by Reuters Estimates had expected.

The company hiked prices on products, leading to a 0.9 percent drop in volume. However, that key result was still better than the company had expected.

Analysts are watching to see how much consumers cut back on buying branded products in the face of rising food prices and a slumping economy.

Kraft sales rose 19.4 percent to $10.46 billion. Organic sales, which exclude the impact of currency, acquisitions and divestitures, rose 7.1 percent due to higher pricing.

Over the past several years, Kraft has closed factories, cut jobs and divested brands to focus on areas like cookies and crackers, pizza and healthier foods.

Shares of Kraft rose 1.8 percent to $29.39 in premarket trading from Tuesday's closing price of $28.88 on the New York Stock Exchange, while Kellogg stock was not active.

Kellogg, the maker of Rice Krispies and Eggo waffles, said net income rose to 89 cents a share from 76 cents a year earlier. The results were far better than the 80 cents analysts had forecast.

Sales rose 9 percent to $3.29 billion. Excluding the impact of currency and acquisitions, the increase was 7 percent.

Kellogg said it expected full-year profit to come in at the high end of its prior forecast of $2.95 to $3 a share, compared with analysts' expectations of $3.

For 2009, the company said it was confident earnings per share would increase at a high single-digit percentage rate, excluding the impact of currency fluctuations.

(Reporting by Ben Klayman and Brad Dorfman; Editing by Lisa Von Ahn)