| By Mike Hughlett in Miami | Irene Rosenfeld stood Tuesday before a crowd of Wall Street analysts to declare that Kraft Foods has all but completed the turnaround she laid out to them three years ago.
Rosenfeld was speaking before the annual meeting here of the Consumer Analyst Group of New York. Three years ago, as Kraft’s relatively new chief executive, she used the meeting as a platform to elucidate how the venerable but lumbering company would increase innovation and boost its sales and profits |
See also • Kraft profit triples on price hikes, beats expectations |
“We’re exiting the turnaround I laid out three years ago on this very stage with strong operational and financial momentum … We didn’t need to acquire Cadbury,” Rosenfeld said referring to the recent blockbuster $19 billion purchase of the British candy maker.
Still, Northfield-based Kraft’s fourth quarter results, released Tuesday, show everything is not quite hunky-dory.
While Kraft, maker of everything from Oreo cookies to Oscar Mayer meats, beat Wall Street’s profit estimates, it fell short of revenue expectations.
Rosenfeld herself acknowledged that a key sales guage “came in somewhat light” partly because the company didn’t engage in price wars in coffee and snack nuts.
Wall Street reacted by pushing Kraft’s stock down 1.79 percent in midday trading on a day the overall market, as measured by the S & P 500, was up 1.31 percent.
Rosenfeld trotted out some key measurements to show Kraft has lived up to her turnaround promises. Kraft’s organic net revenue has grown at a faster pace in the past three years than originally forecast. And free cash flow as a percent of net earnings has risen from 83 percent in 2006 to 124 percent last year.
Kraft’s operating profit margin has started to come around, too, hitting 13.7 percent in 2009, compared to 12.6 percent in 2006. But a question from one analyst shows that Kraft still has a ways to go.
Pointing out that Kraft’s margins were once around 20 percent, “Why should we believe your (financial) targets for Cadbury given your record?” he said.
Rosenfeld said those 20 percent margins, which were posted before she was CEO, weren’t sustainable. And she said she’s confident Kraft can deliver profit margins in the mid- to high teens.
Analysts say that Rosenfeld generally has delivered on the turnaround goals she laid out in 2007. But along with the need to boost profit margins, Kraft’s U.S. market share position remains a lingering issue, which Rosenfeld acknowledged.
Kraft was either gaining or holding market share in only 45 percent of its U.S. retail sales during the fourth quarter. Still, that was an improvement over 34 percent in the third quarter and the highest quarterly mark in 2009.
“We’re not yet where we want to be, but we expect this positive trend to continue,” Rosenfeld said.
