UPDATE 4-Kraft revenue light, sees Cadbury boost long-term

* EPS 48 cts vs Wall St view 45 cts

* Revenue of $11.02 bln falls short of Street view

* Sees pizza sale cutting EPS by 5 cents annually

* To give more guidance on 2010, 2011 in May

* Shares down nearly 2 pct
(Adds CEO and CFO comments, updates stock activity)

By Brad Dorfman

BOCA RATON, Fla., Feb 16 (BestGrowthStock) – Kraft Foods Inc
(KFT.N: ) posted quarterly revenue that fell short of Wall Street
expectations, but said its $18.4 billion takeover of British
chocolatier Cadbury Plc would accelerate long-term growth.

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

“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,” said Edward Jones
analyst Matt Arnold.

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.


For a graphics link, click on:



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

“That was, we believed, an untouchable asset,” ConAgra CEO
Gary Rodkin said when asked if he had looked at Kraft’s pizza
business to grow his own company’s frozen food operations.

“It was a far higher valuation than we would have given
it,” Rodkin said of the Nestle purchase.

Rosenfeld defended the move as a difficult, but important
strategic decision. She was speaking at the Consumer Analyst
Group of New York conference in Boca Raton, Florida.

Kraft shares fell 1.9 percent to $28.55.


The maker of Oreo cookies and Velveeta cheese said
fourth-quarter earnings rose to $710 million, or 48 cents a
share, from $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.

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

Kraft has gotten acceptances for just over 90 percent of
Cadbury’s shares as of Monday. It should own all of Cadbury
within six to seven weeks, Chief Financial Officer Tim McLevish
said during a presentation on Tuesday morning.

Kraft plans to give 2010 earnings guidance and discuss its
2011 outlook when it issues first-quarter results in May,
McLevish said.

He said Kraft does not plan to increase its dividend or buy
back shares while it works on lowering its debt-to-EBITDA ratio
to around 3 times over the next 18 to 24 months.

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

It posted a 10.4 percent rise in developing markets, where
it is aiming for additional growth through the Cadbury deal. In
India, for example, Cadbury brings in $400 million in 2009
revenue, while Kraft’s business there before the deal was not

Kraft’s top 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.

Stock Market Money

(Reporting by Brad Dorfman, additional reporting by Jessica
Wohl; Editing by Derek Caney and Gunna Dickson)

UPDATE 4-Kraft revenue light, sees Cadbury boost long-term