Corporate earnings

Q2 cheese revenues rise at Kraft; net revenues for the company down 1.1%

In the company's Cheese Segment, revenues increased from a combination of higher prices, volume gains and improved product mix with significant gains in Kraft natural cheeses and Velveeta

Kraft Foods Group, Inc. Northfield, Ill., reported today that net revenues in the second quarter declined 1.1% to $4.7 billion and that operating income increased 53.5% to $1.4 billion in the period.

In the company's Cheese Segment, revenues increased from a combination of higher prices, volume gains and improved product mix with significant gains in Kraft natural cheeses and Velveeta. Operating income declined slightly due to unfavorable pricing net of commodity costs versus an exceptionally positive prior year period.

Kraft is ranked 6th on the 2013 Dairy 100, Dairy Foods' annual ranking of the largest dairy processors based in the United States and Canada. Kraft's cheese revenues were $3.8 billion in 2012. The latest Dairy 100 will be published in the August issue of the magazine.

Kraft reported these results in its other segments:

Beverages
• Revenues declined reflecting lower prices from higher levels of promotional activity as well as lower green coffee costs versus the prior year. This more than offset improved product mix from on-demand coffee and liquid water enhancer innovations.
• Operating income was lower than the prior year quarter reflecting higher marketing costs that were partially offset by favorable pricing net of commodity costs.
Refrigerated Meals:
• Ongoing revenue growth from Lunchables innovations and the benefits of pricing to cover higher commodity costs were more than offset by volume softness in cold cuts and the impact of Easter shipment timing on bacon volume versus the prior year.
• Operating income declined due to a negative impact from pricing net of commodity costs versus a strong prior year period and higher marketing expenses, which were partially offset by significant productivity gains.

Grocery
• Revenues declined as top-line gains from investments in innovation behind brands such as Velveeta dinners and Planters snack nuts were more than offset by weakness in Kraft spoonable and pourable dressings and JELL-O.
• Operating income declined as significantly higher marketing investments and lower volumes more than offset overhead cost savings.

International & Foodservice
• Strong revenue growth in Canada from Philadelphia cream cheese, Kraft peanut butter, Kraft Singles and natural cheese and MiO liquid water enhancers was partially offset by product line pruning in Foodservice.
• Double-digit operating income growth reflected improved product mix and lower manufacturing costs driven by net productivity gains, partially offset by significant marketing investments.

For more information, visit www.kraftfoodsgroup.com..