Cadbury takeover affects Kraft Foods’ profit

Cadbury Acquisition Affected Kraft's Fourth Quarter Profits

Cadbury Acquisition Affected Kraft’s Fourth Quarter Profits

Kraft Foods has reported a lower profit for the fourth quarter, ostensibly due to costs incurred to ingrate the operations of Cadbury in the UK.

The results released by the food giant shows that despite increasing overall sales by 30% after the acquisition, Kraft’s net profit fell by 24% to $540 million (£335 million), due to costs associated with integrating the UK operations.

Kraft announced that it will increase prices of its products to offset rising input costs. The company’s projection of “significant input cost inflation” comes a day after similar announcement was made by PepsiCo.

Kraft foods – which owns brands such as Maxwell Coffee House and Oreo cookies, have already raised prices of most of its products in Europe and half of North America. It plans further price hikes this year.

The company foresees weak demand in the developed market in 2011. “There’s no question that in the developed markets, both in North America as well as Europe, that consumer confidence remains weak”, said Irene Rosenfield – chief executive of Kraft foods.

“We expect it will remain weak for the foreseeable future”, she added.

The takeover of Cadbury’s at the beginning of the year reduced Kraft’s profit per share by nearly 33%. Kraft had paid £11.5 billion in acquiring its once rival Cadbury’s.

Cadbury’s performance has been lackluster in the quarter. Its sweets and chewing gum business was slow in southern Europe and was compensated by strong growth in the UK. Its sales of Stride and Trident gum went down in North America driving overall sales down by 6.1%.

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