Kraft Foods 4th-quarter profit falls 72 percent

Kraft Foods Inc., the world's second- largest foodmaker, fell the most in 5½ years in New York trading after reducing its profit forecast because of the stronger dollar.

Earnings in 2009 will be $1.88 a share, compared with the company's October projection of $2, Northfield-based Kraft said today in a statement. Currency effects will lower profit by about 16 cents a share this year, and an increase in pension costs will hurt results by another 8 cents.

Kraft joined companies including Johnson & Johnson and EBay Inc. in saying profit would be hurt by overseas sales when they are translated into dollars. The dollar rose 9 percent to $1.2794 per euro in January, reversing December's 9.1 percent decline. It gained 4.2 percent last year.

"At current levels, the impact of the strong dollar is too much to overcome," Chief Executive Officer Irene Rosenfeld said on a conference call today.

Sales this year also will be lower than forecast as falling dairy expenses have forced down the price Kraft can charge for cheese, Rosenfeld said in an interview. Products ranging from Single Select processed cheese slices to shredded cheddar account for almost 20 percent of sales.

Kraft, which sells Kool-Aid drink mixes and Jell-O desserts, dropped $2.60, or 9 percent, to $26.14 at 1:50 p.m. in New York Stock Exchange composite trading, the steepest drop since July 2003. The stock had gained 7 percent this year before today.

Stronger Dollar

Edgar Roesch, an analyst with Soleil Securities in New York, said he had anticipated gains from price increases would help outweigh the negative effects of the dollar's strengthening against other currencies.

"I'm surprised the foreign exchange is as negative as it is," said Roesch, who recommends holding Kraft shares.

Sales, excluding acquisitions, will rise 3 percent this year, rather than a previously predicted 4 percent, Kraft said. The company lowered prices on its cheese products in January following price increases last year.

Net income in the fourth quarter declined 72 percent to $163 million, or 11 cents a share, because of costs to cut jobs, eliminate product lines and reorganize operations. Excluding those restructuring costs and asset writedowns, earnings of 43 cents a share missed analysts' projections by 1 cent, according to the average of estimates compiled by Bloomberg.

The adjusted results for the fourth quarter also included $170 million, or 8 cents, in losses from hedges against rising commodity costs. Sales in the period rose 6.2 percent to $10.8 billion, missing analysts' estimates of $11.4 billion.