Acquisition costs mount up for Kraft
Integrating chocolate giant Cadbury has cost parent company Kraft about £70.4m ($112m) over the last three months. However, the US food company grew net revenues by 11.5 per cent to more than £8.3bn ($13bn), it revealed.
Kraft, which bought Cadbury in a controversial £11.7bn deal in March last year, said the $112m pre-tax costs were associated with combining the Kraft Foods and Cadbury businesses, and are separate from those involved in the acquisition.
It said: "Integration programme costs were $112m associated with the integration of Cadbury, for the three months ended September 30 2011, as compared to $92m for the three months ended September 30, 2010."
A total of $38m was recorded in cost of sales and $74m was recorded in selling, general and administrative expenses relating to the acquisition over the quarter. In the comparable 2010 period, $3m was recorded in cost of sales and $89m was recorded in the same expenses.
Integration costs negatively impacted growth by 17.2 per cent, said Kraft, a result which was partially offset by a positive 10.9 per cent impact from currency.
Despite the hefty costs, net revenues for the third quarter at Kraft were $13.2bn, up 11.5 per cent on the same 2010 period.
Kraft, which also includes food brands Philadelphia, Oreos and Maxwell House, announced at the end of its last quarter that it would split the businesses into two separate entities.
Once the demerger completes next summer, Cadbury will join a new global snacks business which would also include Trident gum and Oreo biscuits and have estimated revenues of $32bn (£19.6bn).
A North American food business with revenues of $16bn (£9.8bn) would also be formed with brands including Kraft and Philadelphia cheeses and Capri Sun.
"We’ve raised our outlook for the year due to the strong business momentum in each of our geographies," said David Brearton, executive vice president and chief financial officer at Kraft. "While we expect strong operating momentum to continue, our earnings guidance excludes any potential impact from currency in the fourth quarter, as recent volatility has made such forecasts difficult."
