Kraft's pledge over growth as revenue dips below forecasts

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

"The big test is what's to come," Morningstar analyst Erin Swanson said. "They face significant challenges in integrating Cadbury."

In one sign of the added cost of the deal, the largest North American food maker said the related sale of its frozen pizza business to Nestle would cut 5 cents a share from earnings annually.

The maker of Oreo cookies and Velveeta cheese said fourth-quarter earnings rose to $710m, or 48 cents a share, compared with $178m, or 12 cents a share, a year earlier, which included costs tied to Kraft's restructuring programme.

Analysts on average forecast 45 cents a share, according to Thomson Reuters.

Revenue rose 3.2 per cent to $11.03bn, below the $11.07bn predicted by analysts.

Analysts said Kraft was showing some traction in its overall cost-cutting strategy and its plan to lower prices in areas such as cheese that are heavily tied to commodity costs.

Organic revenue, which excludes currency moves and recent asset purchases and sales, rose 0.4 per cent, hit by a decline in dairy costs that led the company to lower cheese prices.

Kraft has said it expects the Cadbury deal to hurt 2010 results.

Yesterday, Kraft reiterated that it expected an addition of 5 cents per share to earnings from the deal on a cash basis in 2011 and long-term EPS growth of 9 per cent to 11 per cent from the combined company.