Kraft Reports ‘Strong Growth’ in Q2, First Half

As the date of its split into two companies approaches on Oct. 1, Kraft Foods Inc. has reported “strong” Q2 and first half 2012 results reflecting growth in its “power brands,” favorable pricing, significant productivity gains and aggressive overhead cost management.

In anticipation of the split, Kraft has named the people who will lead the two new companies, focusing on grocery and snacks.

“Our second-quarter and first-half results reflect the success of our brand-building investments over the past few years and the resilience of our businesses,” said Irene Rosenfeld, chairman and CEO. “As we embark on our journey as two industry-leading, independent companies, I’m confident that both companies have the brands, the executional capability and the leadership teams to succeed in their respective missions.”

Net revenues in the second quarter were $13.3 billion, down 4.3 percent due to a 5 percentage point headwind from currency and a negative 2.7 percentage point impact due to accounting calendar changes in the prior year quarter. Organic net revenues increased 3.4 percent, driven by nearly 6 percent growth from Power Brands.

Operating income in the second quarter was $1.9 billion, and operating income margin increased 1.1 percentage points to 14.1 percent.

First half net revenues declined 0.3 percent; organic net revenues grew 4.9 percent. “Our first-half results are on-track with our previous annual guidance of organic net revenue growth of approximately 5 percent and operating EPS growth of at least 9 percent on a constant currency basis,” said David Brearton, EVP and CFO. “As we look forward, we’re confident that we’re launching two industry-leading companies, each with a great future.”

Kraft also announced the composition of the boards of directors for the two independent companies that will be launched at the spin-off of its North American grocery business, targeted for Oct. 1.

As previously announced, Rosenfeld will be chairman and CEO of the global snacks company, Mondelez International Inc. John Cahill will be executive chairman of the North American grocery company, Kraft Foods Group Inc., and Tony Vernon, currently EVP and president of Kraft Foods North America, will be CEO.

In addition to Rosenfeld, the following individuals will serve on the Mondelez board of directors: Stephen Bollenbach, retired executive of Hilton Hotels Corp. and the Walt Disney Co.; Lewis Booth, retired EVP and CFO of the Ford Motor Co.; Lois Juliber, Kraft Foods director since 2007; Mark Ketchum, Kraft director and former president/CEO of Newell Rubbermaid Inc.; Jorge Mesquita, Procter & Gamble executive and a Kraft director since May; Fredric Reynolds, Kraft director since 2007 and retired EVP and CFO of CBS Corp.; Ruth Simmons president emerita of Brown University; and Jean-Francois van Boxmeer, Kraft director since 2010 and chairman/CEO of Heineken N.V.

In addition to Cahill and Vernon, the following individuals will serve on the board of directors of Kraft Foods Group Inc.: Abelardo Bru, retired vice chairman of PepsiCo Inc.; Kevin Cox, EVP of human resources at American Express; Myra Hart, Kraft director since 2007, Harvard Business School faculty and co-founder of Staples Inc.; Peter Henry, Kraft director since 2011 and dean of the Leonard N. Stern School of Business at New York University; Jeanne Jackson, president of direct to consumer for Nike Inc.; Terry Lundgren, Kraft director since May and president/CEO of Macy’s Inc.; Mackey McDonald, Kraft director since 2010 and senior advisor to Crestview Partners; Jack Pope, Kraft director since 2001 and chairman of PFI Group; and Follin Smith, former EVP, CFO and CAO of Constellation Energy Group Inc.

Finally, Kraft Foods has named Tracey Belcourt as EVP of strategy, effective in September. Belcourt will lead the strategy function and mergers and acquisition activities for the global snacks company, Mondelez International.

“Tracey is a highly accomplished corporate strategist with extensive background in consumer industries,” Rosenfeld said. “She has broad international work experience throughout Latin America, Europe, Asia and Africa. She joins us at an exciting time, as we chart the course for our new global snacks company.”

Northfield, Ill.-based Kraft Foods Inc. markets biscuits, confectionery, beverages, cheese, grocery products and convenient meals in approximately 170 countries under iconic brands including Cadbury, Jacobs, Kraft, LU, Maxwell House, Milka, Nabisco, Oreo, Oscar Mayer, Philadelphia, Tang and Trident.