Kraft Earnings Sink 34% on Restructuring Expenses

Kraft Foods Inc. on Monday said its first-quarter profit tumbled 34% amid continuing restructuring costs and sluggish sales volume at the nation’s largest food company.

Net income fell to $560 million, or 33 cents a share, down from $848 million, or 49 cents, for the same period in 2003.

Excluding charges totaling 12 cents a share for restructuring, the company said earnings would have been 45 cents a share -- 2 cents better than the consensus estimate of analysts surveyed by Thomson First Call.

Revenue was a better-than-expected $7.69 billion, up 4.5% from $7.36 billion a year earlier mostly because of the weak dollar. Sales volume rose just 0.5%.

“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 the Northfield, Ill.-based company.

Costlier commodities, especially historically high costs for U.S. cheese, also affected Kraft’s results.

Dollive also acknowledged that the company was “not pleased” with international results, citing problems with pricing, timing and shipments in some regions -- although there were improved showings in the key markets of Britain, Germany and China.

Kraft made no reference in its report to the continuing absence of Chief Executive Roger Deromedi, who was hospitalized March 27 with what it said last week was a viral infection accompanied by acute dehydration. Deromedi has been recovering at his Connecticut home.

After stating briefly during a conference call that Deromedi was “feeling better each day” and looking forward to his May 10 return, Dollive took umbrage at an analyst’s suggestion that Kraft should have discussed the illness more openly.

“I think our board took the appropriate action from a governance perspective” in terms of ensuring there was continuity for the organization, he said.

Kraft’s stock, which is down 3% since the start of the year, closed up 3 cents at $31.39 on the New York Stock Exchange before the report was released. Shares traded 19 cents lower after hours.