Kraft Foods Group Inc (KRFT) Reports Lowlier Profits Amid Increasing Food Prices

Kraft Foods Group Inc (KRFT)

The shares of Kraft Foods Group Inc (NASDAQ:KRFT) slid nearly 3% during the afterhours trade post its third quarter 2014 financial results. The company reportedly lost its profit margins because of price hikes with a marginal increase in its overall revenue.

Kraft Foods reported net revenues of $4.4 billion in its third quarter 2014 along with 0.9% increase in organic net revenues. The food company reported 16.6% decline in its operating income at $0.7 billon primarily because of negative impacts resulting from its post-employment benefit plans. Earnings per share slid slightly to $0.74 or net income of $446 million as compared to $0.83 or $500 million in the same quarter last year.

Kraft Foods Group Inc (KRFT)

Tony Vernon, CEO of Kraft Foods Group Inc (NASDAQ:KRFT), said,

“We remain on track to deliver earnings growth consistent with the expectations we laid out at the start of the year, despite a rapidly changing consumer environment. To date, our implementation of commodity-based pricing has been successful.  But in other areas, our execution has been mixed.  We will continue to apply our playbook, improve our execution, and proactively adapt to drive profitable growth now and in the future.”

These results clearly indicate the pricing actions practiced by the company because of the higher commodity costs. The food and beverage maker reported loss in its gross margins at 29.3% during the quarter when compared with the gross margin of 33.8% in the prior year period.

The challenging dairy cost environment forced Kraft Foods Group Inc (NASDAQ:KRFT) to increase prices of more than half of its products. However, the company has been offering discounts to counter the increasing product prices.

Earlier this month, board of directors of Kraft Foods increased the quarterly dividend by nearly 5% to $0.55 as compared to the initial dividend of $0.525 per share.

This article has been written by Prakash Pandey.

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