Kraft Foods Group Reports Fourth Quarter, Full Year 2014 Results

NORTHFIELD, Ill., Feb. 12, 2015 /PRNewswire/ -- Kraft Foods Group, Inc. (NASDAQ: KRFT) today announced financial results that reflected the impact of significant pricing actions to offset record-high commodity costs, mixed execution across the business portfolio as well as a number of factors, which are not expected to repeat, that influenced both the fourth quarter and full year.

Fourth Quarter Financial Summary

• Net revenues grew 2.2 percent and Organic Net Revenues were up 3.4 percent. Organic growth was driven by positive net pricing of 1.9 percentage points to offset higher input costs, as well as volume/mix gains of 1.5 percentage points from growth in the Refrigerated Meals, Exports and Canada businesses.
• An operating loss of $614 million and EPS loss of $0.68 were driven by a non-cash loss of $1,364 million, or $1.43 per diluted share, from market-based impacts to post-employment benefit plans. The loss from market-based impacts to post-employment benefit plans was driven by a combination of lower discount rates and updated published mortality assumptions, partially offset by favorable asset returns.
• Excluding market-based impacts to post-employment benefit plans in both years, operating income grew at a low single-digit rate and EPS grew at a double-digit rate. Operating income growth was primarily driven by lower advertising and overhead costs, as well as the absence of recall costs versus the prior year quarter. A net benefit was also realized from a combination of lower manufacturing costs, primarily driven by productivity gains, and higher net pricing that more than offset higher commodity costs. EPS growth was further enhanced by a lower tax rate versus the prior year quarter.
• Fourth quarter 2014 results also included $92 million, or $0.10 per diluted share, of unrealized losses from commodity hedging activities.

2014 Financial Summary

• Net revenues decreased 0.1 percent and Organic Net Revenues were up 0.9 percent versus the prior year. Net pricing contributed 1.2 percentage points of growth and reflected significant price increases in response to rising commodity costs that were partially offset by higher promotional spending in the Meals & Desserts and Beverages businesses. Volume/mix declined 0.3 percentage points due to volume losses associated with certain pricing actions, primarily in cheese, as well as category weakness in meals and market share losses in desserts.
• Operating income of $1.9 billion and EPS of $1.74 included a non-cash loss of $1,341 million, or $1.41 per diluted share, from market-based impacts to post-employment benefit plans.
• Excluding market-based impacts to post-employment benefit plans in both 2014 and 2013, operating income grew at a mid-single-digit rate while EPS advanced at a double-digit rate. Operating income growth was primarily driven by a reduction in spending on cost savings initiatives,² reduced marketing expenditures and favorable retirement-related benefit adjustments primarily resulting from lower-than-expected claims experience in 2014. A net benefit was also realized from a combination of manufacturing productivity gains and higher net pricing that more than offset higher commodity costs. EPS growth was further enhanced by a lower tax rate versus the prior year.
• 2014 results were also tempered by $79 million, or $0.09 per diluted share, of unrealized losses from commodity hedging activities.
• Free Cash Flow of $1.5 billion was in line with the prior year as the current year reflected the benefit of lower pension plan contributions while the prior year included significant working capital improvements. View full report here.