Kraft Earnings Drop; Full-Year Outlook Is Cut

Kraft Foods Inc. posted lower third-quarter earnings and cut its full-year profit outlook, pressured by rising costs for packaging, fuel and ingredients such as nuts.

The maker of Oreo cookies and Jell-O pudding also said it was considering more price increases to try to offset rising costs.

Kraft now expects commodity costs to be up $800 million from last year, more than three times its initial expectations.

The largest U.S. food company said profit fell in the quarter to $674 million, or 40 cents a share, from $779 million, or 46 cents, a year earlier. Sales rose 4.4% to $8.06 billion.

Analysts on average forecast profit of 46 cents a share, according to Reuters Estimates.

Soaring oil prices that were exacerbated in the quarter by the effects of Hurricane Katrina hit Kraft in several ways, Chief Executive Roger Deromedi said.

Aside from having to pay increased fuel costs, Kraft also buys about $1.5 billion in plastic packaging a year, and the cost of resin, a key material, rose 25% in the third quarter.

Meanwhile, customers who are paying more at the gas pump may have to cut back in other areas, including what food they buy, he said.

The company said it now expected full-year earnings of $1.86 to $1.89 a share, compared with its previous forecast of $1.91 to $1.96 a share.

The stock closed at $29.39, down 21 cents, before the earnings announcement. The shares fell 4.2% in after-hours trading.