COSTS resulting from the takeover of UK chocolate business Cadbury contributed to a 24% drop in fourth quarter profits for new owner Kraft.
The cost of ingredients such as corn, sugar and cocoa also bit into results as the owner of brands including Oreo cookies, Capri-Sun and Maxwell House coffee saw income fall to £335m in the final three months of 2010.
Cadbury’s revenues were flat in Europe as solid growth in the UK was offset by weaker sales of gum and sweets in southern Europe.
The Cadbury business fared less well in North America, where revenues were down by 6.1% due to lower sales of Trident and Stride gum and strong trading by Halls cough drops a year earlier.
Across the Kraft business, revenues increased by 30% to £8.6bn. That included a 26.2% contribution from Cadbury, which the company bought amid much controversy for £11.5bn last February.
Cadbury, which includes Kit Kat, Wispa and Dairy Milk among its brands, lifted like-for-like revenues by 2.2%, helped by demand in emerging markets.
Kraft’s operating income for the quarter was also affected by the costs of integrating the Cadbury business, the company added.
The Illinois-based firm softened its November guidance on profits growth this year to between 11% and 13%.
It also warned that higher costs for ingredients and weak consumer confidence meant it faced a tough road ahead.
Chief executive Irene Rosenfeld described the results for 2010 as solid and said the company finished the year with good momentum.
“Looking ahead, we expect the operating environment to remain challenging, with significant input cost inflation and persistent consumer weakness in many markets,” she added.
While Kraft’s underlying results met Wall Street expectations, the comments on 2011 trading will add to concerns about prospects in the consumer goods sector.
Drinks firm Diageo, which owns brands including Johnnie Walker and Guinness, reported half-year results short of expectations earlier this week.
Household products companies Reckitt Benckiser, Colgate-Palmolive and Procter & Gamble have also disappointed analysts in recent days.
