Kraft Outlines New Companies' Targets
Kraft Foods executives have provided guidance on the near and long-term financial targets for the two separate companies to be created on Oct. 1.
Mondelez International, the global snacks company, is projected to realize 2013 organic net revenue growth of 5% to 7% and operating EPS of $1.50 to $1.55.
The EPS range was below some analysts’ expectations. Kraft said the company may come in at the lower end of the growth range next year due to smaller contributions from price increases and unfavorable currency exchange trends.
The long-term organic revenue growth target for Mondelez is also 5% to 7%, with operating EPS growth projected in the double digits on a constant-currency basis.
Kraft Foods Group, the new North American grocery business, is expected to produce organic revenue growth “in line with market growth,” despite a negative impact of one point due to product discontinuations.
Productivity improvements and overhead savings are expected to drive 2013 EPS of approximately $2.60 on a GAAP basis. An extra $200 million tax payment next year will affect cash flow. The company’s management team expects to recommend an annual dividend of $2 per share to the board.
Long-term, the company’s focus will be on steady growth, cash flow, competitive dividends and reinvestment in people, innovation and brand-building.
Financial goals are organic revenue growth at or above the North American food and beverage market rate of growth; mid-single-digit operating income growth; mid- to-high single-digit EPS growth; mid-single-digit dividend growth; and free cash flow of at least 85% of net income.
Executives said that the company will “turbocharge” its brands by focusing on delivering the right products at the right prices, introducing “big bet” innovations, addressing health/wellness by reformulating existing products and launching new ones, and investing in marketing. Kraft noted that increased advertising has resulted in significant sales gains for brands including Velveeta, Philadelphia, Kraft Mayo and Capri Sun.
Tony Vernon, CEO of Kraft Foods Group, told analysts that the new company will “purge the post office culture” that was “rife with bureaucracy and entitlement,” and reward employees for performance rather than seniority.