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Kraft's profit rises as it embraces startup spirit

Associated Press Modified: November 7, 2012 at 5:45 pm •  Published: November 7, 2012

In addition to bolstering its flagship brands, Kraft is betting that innovation will drive growth. Last spring, for example, the company introduced its MiO liquid drops, which can be squeezed into water for flavored drinks. The drops have spawned copycats including one by the Coca-Cola Co. MiO now has 11 varieties, including two energy drink versions that were introduced this year.

To navigate the challenging economy, Kraft is also moving to provide tiered options of "good, better and best" prices in each of its categories. With cheese, for example, its Cracker Barrel brand is positioned as a more premium offering than its namesake cheese.

For the period ended Sept. 30, Kraft said it earned $470 million, or 79 cents per share. That compares with $417 million, or 70 cents per share, a year ago.

Revenue rose 3 percent to $4.6 billion, as volume from new products offset the discontinuation of less-profitable items, such as certain package sizes of Planters and Oscar Mayer. Retailers also stocked up on inventories before the split, which took place on Oct. 1.

Analysts on average expected a profit of 69 cents per share on revenue of $4.54 billion.

Gross profit rose 16 percent as costs for ingredients eased. A lower effective tax rate offset restructuring costs associated with its split from Mondelez.

For 2013, Kraft still expects to earn $2.60 per share, including 26 cents per share in restructuring costs. But in the current quarter, the company noted that revenue could be flat to down as it continued to prune products and retailers remain stocked up on inventories. Without providing any specific earnings per share guidance, the company also noted that the fourth quarter would be the first that reflected its costs as a stand-alone company and that restructuring costs would continue.

In December, the company plans to recommend quarterly dividend of 50 cents per share.

Its shares fell 13 cents to close at $44.57 Wednesday as the broader market fell sharply.