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The Kraft Squeeze

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January 30, 2008 – Comments (1) | RELATED TICKERS: KRFT

Kraft is yet another reporting the type of margin squeeze that I expect the economy as a whole to increasing show. 

"The sales increase was a sign Kraft is having some success with new products and improved marketing. But the company still continues to battle higher costs for ingredients and energy.

The maker of foods ranging from Oreo cookies to Crystal Light drink mix said profit was $585 million, or 38 cents a share, in the fourth quarter compared with $624 million, or 38 cents a share, a year earlier when the company had roughly 100 million more shares outstanding.

Earnings were 44 cents a share excluding restructuring costs, matching the average analyst estimate compiled by Reuters Estimates.

Revenue rose to $10.40 billion from $9.37 billion. Excluding divestitures and the benefit from the weaker dollar, "organic" revenue rose 6.2 percent, the company said."

I have to get to work, but I think that is a 6% decline in the number of shares...  Share buyback?  I will look at this one more closely later.

 

1 Comments – Post Your Own

#1) On January 30, 2008 at 11:05 PM, dwot (97.55) wrote:

Having a peek at Kraft. I can't seem to get to their financial reports, so only looking from here. It looks like from 2003 to 2006 they were paying back debt, about $4.5 billion paid back and then in the first three quarters they increased debt by about $3.5 billion. Interesting, it looks like equity was fairly flat, but all of sudden this year it has dropped by close to $2 billion. Hmmm, the short term debt increase by almost $2 billion while the long term was declining. Total decline more like $3.7 billion. And now total liabilities have increased to they are pretty close to what they were in 2003.

1.72 billion share in 2003. 1.55 billion as of Q3. About 10% fewer shares since 2003.

Interest expense declined $100 million from 2003 to 2006.

On a non-GAAP basis, the company's net earnings fell 18.2% to $689 million from $842 million in the prior-year quarter. Earnings per share excluding items declined 13.7% to $0.44 from $0.51 last year.

My goodness, let me get this straight... They have about 7% increase in sales, 100 million fewer shares is about 6% less shares and gap earnings decline by 14%. Very bad.

7% increased sales, 18-19% increased cost of sales, huge squeeze.

Well, I am tired and this looks like a disaster. They have enormously increasing costs at the wholesale level and cash strapped consumers at the retail level. They have a less pricing power because consumers are so pinched, and they mention competition in their report.

These numbers look so bad, it would be worthwhile to dig deeper...

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