As dairy farmers smile over milk prices,
Kraft sees “challenges” for food industry

April 20, 2004, as reported by Food giant Kraft Foods is reporting a first-quarter drop in profits of 34%. It is believed restructuring changes and increased marketing investment have led to the slacking numbers.

Net earnings are down 16 cents a share compared to this time last year. The maker of Kraft cheese, Nabisco cookies and Oscar Mayer meats posted net earnings of $560m for the first quarter through March 31, 2004. For the same period a year ago earnings were reported at $848m.

The company is already being cautionary in its earnings projections for the year, warning shareholders to expect full-year earnings per share to be at the lower end of its guidance range of $1.63 to $1.70 per share, due primarily to commodity costs that were higher than originally anticipated.

"As expected, the company's first quarter earnings were down versus prior year due to restructuring charges, increased marketing investment and higher benefit costs," said Jim Dollive, chief financial officer of Kraft Foods.

"Costs of many commodities surged during the quarter, most notably US cheese costs, which reached historical highs. These higher costs are expected to be a key challenge for both Kraft and the food industry," Dollive added.

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