Kraft revenue light, sees Cadbury boost long-term

BOCA RATON, Florida (Reuters) - Kraft Foods Inc posted quarterly revenue that fell short of Wall Street expectations, but said its $18.4 billion takeover of British chocolatier CADBURY (CBRY.LO)Plc would accelerate long-term growth.

Kraft reached a deal to buy Cadbury and create the world's largest confectioner last month. Investors are waiting to see how the deal boosts Kraft's growth, especially since top Kraft investor Warren Buffett had opposed the transaction.

"The big test is what's to come," Morningstar analyst Erin Swanson said. "They face significant challenges in integrating Cadbury."

Kraft expects costs of $1.3 billion through the end of 2012 to integrate Cadbury's operations and would achieve annual pretax savings of at least $675 million in that time frame.

It stood by forecasts for long-term earnings per share growth of 9 percent to 11 percent and organic revenue growth of at least 5 percent for the combined company. Organic revenue excludes currency moves and recent asset purchases and sales.

The largest North American food maker also said the related sale of its frozen pizza business to Nestle would cut 5 cents a share from earnings annually. Some investors had questioned Chief Executive Irene Rosenfeld's rationale in selling the thriving business to fund the Cadbury deal.

"There's still plenty of uncertainty in terms of whether Kraft will able to effectively integrate this new business well enough to justify the price they paid," Edward Jones analyst Matt Arnold said.

Kraft shares fell 2.2 percent, or 64 cents, to $28.45 in morning trading on the New York Stock Exchange.

LITTLE VISIBILITY INTO 2010

Analysts are looking for specific details about future plans from Kraft, but the company is keeping mum on specific forecasts for 2010 in deference to British takeover rules.

But some said Kraft was showing some traction in its overall cost-cutting strategy and its plan to lower prices in areas such as cheese that are heavily tied to commodity costs.

The maker of Oreo cookies and Velveeta cheese said fourth-quarter earnings rose to $710 million, or 48 cents a share, compared with $178 million, or 12 cents a share, a year earlier, which included costs tied to Kraft's restructuring program.

Analysts on average forecast 45 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 3.2 percent to $11.03 billion, below the $11.07 billion predicted by analysts.

Organic revenue rose 0.4 percent, hit by a 13.7 percent decline in its cheese business as it cut prices to respond to a decline in dairy costs.

By region, Kraft's organic revenue fell 2.7 percent in North America and 0.3 percent in Europe.

But it posted 10.4 percent growth in developing markets, where it is also aiming for additional growth through the Cadbury deal.

Some of its strongest brands overseas included Tang powdered drinks in Latin America, Oreo cookies and Philadelphia cream cheese in the Asia Pacific and Jacobs coffee in the region covering central and eastern Europe, the Middle East and Africa.

(Reporting by Brad Dorfman; Editing by Derek Caney)

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