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HenryTo
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Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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 Posted: Tue Feb 21, 2012 10:02 pm Post subject: |
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Morningstar on KFT's 4Q results and planned divestiture.
| Quote: | | Strong internal sales growth driven by pricing boosted sales in Kraft's KFT fourth-quarter results, reported Tuesday. The firm ended the year on a better note than it started and remains on track to separate into a North American grocery business and snack business by the end of 2012. Management outlined $1.6 billion-$1.8 billion in transaction costs that it expects to incur as part of the deal, as well as $400 million-$800 million in debt breakage and financing fees as it "executes a migration of debt to the North American grocery company." We're not surprised by this strategy, given our thinking that the grocery business will be better suited for income-oriented investors, though the amount of debt placed on the new company's balance sheet may temper any dividend payout in the near term. The firm presents this morning at the Consumer Analyst Group of New York conference in Boca Raton, Fla., and we'll be looking for more detail on its plans for the breakup. For now, our fair value estimate of $39 is intact and we view the stock as fairly valued. Total revenue for the quarter increased 6.6%, including 6.1% internal sales growth. Gross margins declined 150 basis points to 33.3% from the year-ago period, but strong cost controls and asset-impairment costs in the base period made for a easier comparison and operating margins improved 70 basis points to 10.3%. Internal sales growth was positive across Kraft's regions, with sales up 7.0%, 3.2% and 7.2% in North America, Europe, and developing markets, respectively. The top-line results were driven by pricing, however, as volume declined across these regions. Declines in Europe were the most pronounced at 2.0%, while in North America volume was down 1.5%. While it's positive that Kraft has been able to push through price increases, the volume trends are a concern and, in addition to higher input costs, will prob ably pressure gross margins until the firm is able to reverse this trend. Volume declines are not unique to Kraft in the current environment, but the dynamic may become more pronounced as the firm separates, since we view the snack business as a higher-growth opportunity, both in sales and volume, longer term. |
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HenryTo
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nodoodahs
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Joined: 06 May 2005
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| Posted: Fri Jan 05, 2007 3:30 pm Post subject: |
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Funny how the charts always seem to hear the news before the press does ....
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rffrydr
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