( KFT) posted a 23% rise in its fourth-quarter profit and announced additions to its two-year old restructuring program, including an 8% cut in its workforce and the closure of 20 facilities.
The maker of Oscar Mayer luncheon meat, Philadelphia cream cheese and Maxwell House coffee reported a fourth-quarter profit of $773 million, or 46 cents a share, up from $628 million, or 37 cents a share. The results included 10 cents a share in charges from the restructuring program and impairment charges. Analysts polled by Thomson First Call had an average estimate for earnings of 53 cents a share.
Fourth-quarter revenue rose 10% to $9.66 billion from $8.78 billion, aided by favorable currency and an extra week in the quarter. Wall Street targeted revenue of $9.31 billion. Volume, meanwhile, rose 7.3%, but was flat when excluding the extra week.
Kraft has been in the midst of a three-year restructuring program that was begun in January 2004 as an effort to boost savings and stave off private-label brands that had increasingly been gaining market share. The plan was expected to result in savings of $400 million by the end of 2006 and pretax costs of $1.2 billion. So far, the company has announced the planned closures of 19 production facilities and the elimination of 5,500 jobs.
The company, which is majority owned by
, said Monday it plans to broaden the program with more cuts, including the 20 additional plant closures and the elimination of 8,000 positions through 2008. In addition, the company plans to continue reducing its stock keeping units, or SKUs, eliminating 10% of them in 2006.
The expanded restructuring program is expected to add $700 million in pretax savings and $2.5 billion in pretax costs to the original plan. For 2006, Kraft sees earnings of $1.38 to $1.43 a share, including $1.3 billion, or 50 cents a share, in restructuring and impairment charges.
Earnings from operations are expected to grow by 13 cents to 18 cents a share from Kraft's 2005 EPS of $1.72. Analysts had forecast 2006 earnings of $1.90 a share, before charges.
"While we expect the challenging environment to continue in 2006, I believe that our combination of stronger Brand Value propositions and aggressive cost reduction programs will drive improved results this year and beyond," said Chief Executive Roger Deromedi in a statement.
One of Kraft's bigger problems in the past year has been higher commodity costs, which the company has attempted to address with price increases. Year over year, Kraft's commodity costs rose $200 million in the fourth quarter and $800 million for 2005, the company said.
Kraft shares recently were up 99 cents, or 3.3%, to $30.99 in after-hours trading.