Kraft Foods: HY-Figures 2010 better as expected?

US largest food maker Kraft Foods (US:KFT) announced HY-figures for fiscal 2010. Net revenues grew 25.6 percent while net earnings rose 89.9 percent thanks to Cadbury takeover. Analysts cheers, but are the figures really good?

KFT´s half-year figures appears somewhat difficult. One the one hand, the company suffers in American Markets, especially within the cheese market and grocery (-0.1 percent in organic sales). On the other hand, in Europe and Developing Markets, KFT realizes the strongest organic growth (+3.5 percent, +9.4 percent) thanks to Cadbury takeover. In total, KFT announced 3 percent organic growth for HY 2010. During Q2, US and Developing Markets become stronger while Europe Markets are slightly weaker. After weak performance in US markets, KFT plans to gain market shares due to selective advertising spending.

Here are financial tables:
http://long-term-investments.blogspot.com/2010/08/kraft-foods-hy-figures-better-as.html

Total operating income were up 10.5 percent as of half-year balance sheet date and amounted to USD 2.9 billion while net income increased 89.9 percent to USD 2.82 billion. At the same time, the company serves USD 2.8 billion in cash and cash equivalents (FY 2009: USD 2.1 billion) while a huge amount of USD 29.1 billion (FY 2009: USD 18.0 billion) in long-term debt was accounted. At half-year-end 2010, USD 33.36 billion equity faces USD 91.59 billion in total liabilities and equity, representing an equity ratio of 36.4 percent.

Kraft adjust its forecast for 2010. Today, the company expects to grow in combined organic net revenue in a range of 3-4 percent (prior guidance of at least 4 percent). The change in outlook reflects the normalizing of Cadbury’s trade inventory practices as well as an aggressive promotional environment in certain U.S. categories. The company also confirmed its guidance for 2010 to realize operating earnings per share of at least USD 2.00. KFT increased its estimate of total cost synergies expected from the integration of Cadbury to at least USD 750 million (prior: USD 675 million). Total costs of the integration program were increased to approximately USD 1.5 billion from USD 1.3 billion.

Thomson Reuters analysts expecting for FY 2010 an EPS of USD 2.03 and USD 2.32 for FY 2011, representing a growth of +0.4 percent/+14.2 percent.

We believe that KFT shows signs of a value stock. The greatest burden of the company is the high loan value, not only caused by the Cadbury takeover. The decisive factor of KFT stocks could be a question of how good the company manage further growth to reduce debt figures. At the moment, it seems that KFT is on a good way to perform better as expected due to higher synergies. But the extend of these positive factors are not as large as it would be necessary to push the company straight forward.

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This release was published on openPR.