Kraft cuts sales forecast, reaffirms Cadbury interest

Kraft Foods Inc., the maker of Oreo cookies and shredded cheese, lowered its annual sales forecast and said it will remain disciplined in pursuing an acquisition of U.K. confectioner Cadbury Plc.

Kraft, based in Northfield, reiterated its interest in the maker of Creme Eggs, and said today a purchase would have to add to cash earnings in its second year and allow the company to maintain its dividend.

Kraft said organic net revenue, which excludes acquisitions, divestitures and currency effects, will rise 2 percent in 2009, down from a previous 3 percent forecast. Kraft has less than a week to make a formal offer for Cadbury, which has called the proposal a bid from a "low-growth" conglomerate.

"With or without Cadbury, Kraft Foods is well-positioned," Chairman and Chief Executive Officer Irene Rosenfeld said on a conference call.

Lower-than-expected list prices and weakening European economies contributed to the lower sales projection, Kraft said. The company also raised its annual profit forecast.

Earnings per share will be at least $1.97 in 2009, up from a previous prediction of at least $1.93, Kraft said. The company said the forecast includes further marketing investments and costs related to a possible takeover of Cadbury.

Still Interested

"We remain interested but will maintain a disciplined approach," Rosenfeld said in the statement today.

Kraft declined 84 cents, or 3.1 percent, to $26.70 at 5:51 p.m. after the close of regular New York Stock Exchange trading. The shares have advanced 2.6 percent this year.

Third-quarter profit excluding some items was 55 cents a share, compared with 34 cents a year earlier, the maker of shredded cheese and DiGiorno frozen pizza said. The average of 12 analysts' estimates compiled by Bloomberg was 48 cents.

"The fact that they tempered the sales outlook kind of offsets some of the optimism you'd normally have because they beat earnings expectations," Matt Arnold, an analyst with Edward Jones & Co. in St. Louis, said today in a telephone interview. He recommends holding the shares.

Net income fell to $824 million from $1.36 billion a year earlier, when the sale of its Post cereals unit bolstered earnings. Revenue dropped to $9.8 billion from $10.4 billion. Analysts estimated $10.2 billion.

Kraft proposed a cash-and-stock takeover on Aug. 28, valued at 10 billion pounds ($16 billion), based on today's closing stock prices. A purchase would add Cadbury's Dairy Milk chocolate to Kraft products including Philadelphia cream cheese and Kool-Aid.

U.K. regulators have given Kraft until Nov. 9 to make a formal offer or stop its pursuit for six months.