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Kraft Foods to Split Into Two; Lifts Outlook

Updated from 6:31 a.m. EDT

NORTHFIELD, Illinois ( TheStreet) -- Kraft Foods (KFT) plans to split into two: a snacks business and a North American grocery business.

The snacks business, with estimated revenue of about $32 billion, will consist of the current Kraft Foods Europe and developing markets units as well as the North American snacks and confectionery businesses, the company said in a statement.

The North American grocery business would consist of the current U.S. beverages, cheese, convenient meals and grocery segments and the non-snack categories in Canada and food service.

The company said Thursday it expects to create the companies through a tax-free spinoff of the North American grocery business to company shareholders. It expects the plan to be completed by the end of the year.

"As our second-quarter results once again show, our businesses are benefiting from a virtuous cycle of growth and investment, which we fully expect will continue," said Chairwoman and CEO Irene Rosenfeld, in a statement. "We have built two strong, but distinct, portfolios. Our strategic actions have put us in a position to create two great companies, each with the leadership, resources and strong market positions to realize their full potential. The next phase of our development recognizes the distinct priorities within our portfolio. "

Kraft reported second-quarter earnings of $976 million, or 55 cents a share, from $937 million, or 53 cents, a year earlier. Operating earnings were 62 cents a share.

Revenue rose 13.3% to $13.88 billion. Organic revenue rose 7.1%.

Analysts were expecting Kraft to post operating earnings of 58 cents a share on revenue of $13.08 billion.

Kraft raised its 2011 outlook and said it expects operating earnings of at least $2.25 a share from at least $2.20 a share. It expects organic revenue growth of at least 5% from at least 4%.

-- Written by Joseph Woelfel

>To contact the writer of this article, click here: Joseph Woelfel

>To submit a news tip, send an email to: tips@thestreet.com.

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