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UPDATE 2-Kraft Foods revenue rises modestly as price increases dent sales
July 30, 2014 / 9:21 PM / 3 years ago

UPDATE 2-Kraft Foods revenue rises modestly as price increases dent sales

(Adds CEO and CFO comments and operating income figure)

By Anjali Athavaley

NEW YORK, July 30 (Reuters) - Kraft Foods Group Inc said on Wednesday that its second-quarter revenue barely rose as price increases it implemented to cover rising commodity costs hurt consumer demand.

Revenue rose 0.7 percent to $4.7 billion, helped by the Easter holiday which fell within the second quarter this year. Excluding the impact from Easter, Kraft, whose brands include Jell-O and Maxwell House coffee, said sales volumes of products like cheeses and cold cuts were hurt by the price hikes, which the company imposed on half its products.

The company said its net income fell to $482 million, or 80 cents per share, from $829 million, or $1.38 per share, a year ago when the company benefited from a gain tied to employee pensions. Analysts on average were expecting 82 cents a share, according to Thomson Reuters I/B/E/S.

Excluding the benefit, Kraft said operating income rose roughly 10 percent to $874 million. Its shares were down 2 percent in after-market trading.

Commodity costs were not the only challenge in a quarter that reflected “a rare confluence of events,” Chief Executive Officer Tony Vernon said on a conference call with analysts.

Kraft, like others in the packaged food industry, is dealing with a tough environment as consumers look to save money and increasingly shop for healthier products.

The company lowered prices through Easter, Memorial Day and July 4th promotions on products like Velveeta dinners and Capri Sun drinks, leading to a decline in revenues in the company’s meat and desserts business and flat beverages sales.

“When we take a close look in the mirror, it’s clear our report card is mixed from an operating perspective during the first half of the year,” Chief Financial Officer Teri List-Stoll told analysts. “In a couple of our businesses ... we relied more on promotional and coupon activity in the second quarter than we would want to.” (Reporting by Anjali Athavaley; Editing by Cynthia Osterman)

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