Philip Morris records strong Q2 results - Brief Article

Eurofood, August 31, 2000

US tobacco group Philip Morris reported underlying net earnings up 5.5% to US$2.2bn (2.4bn [European Dollar]) for Q2 of 2000, with both its US food operations and its international food activities contributing to the growth. Geoffrey C. Bible, company chairman and CEO said that the company is "in an excellent position to meet the company's growth targets for the full year".

Kraft Foods North America (Kraft) performed well in the quarter with underlying income growing 5.3% to US$996m. Kraft's frozen pizza business gained volume through the introduction of DJ Giorno half frozen pizzas. There was also a continued success for Kraft cheese, including the Philadelphia brand. In the meat sector, the Q1 acquisition of Boca Burger boosted income. Also in Canada, the retail grocery business grew aided by the introduction of new products such as Delissio frozen pizza and Jell-O ready to eat desserts.

Kraft Foods International (KFI) also saw operating income grow strongly despite difficult currency conditions, with an underlying income of US$289m, a rise of 6.3% compared to the same period of 1999. The company reported growth across all regions and categories. In the coffee sector, there was a strong volume growth in the key European markets, highlighted by solid performances of Jacobs Kronung in Germany, Grand'Mere in France, and both Maxwell House and Kenco brands in the UK. There were also positive coffee sales in the Slovak Republic and Poland, as well as excellent growth in China.

Confectionery also saw solid gains across Europe, Asia Pacific and Latin America. Successful new products and line extensions continued to drive the confectionery business, with particularly strong performances from the flagship Milka brand. In Central and Eastern Europe, new products were launched in the Czech Republic, Lithuania and Romania. Kraft Foods International's cheese and grocery sectors also experienced favourable growth, with a strong success of the Dairylea Lunchables Fun Pack, the prepared lunch snack of cheese and ham cuts with biscuits aimed at children. There were also positive results for Philip Morris' beverage businesses regarding both soft drinks and the brewing industry.

Philip Morris Q2 1999 and 2000 results by divisions (US$m)

                                   1999     2000   % /-

Operating revenues

Domestic tobacco                  9 915   11 152   21.3
International tobacco            14 266   13 928   -2.4
International food                4 352    4 200   -3.5
North American food               9 022    9 327    3.4
Beer                              2 208    2 300    4.2
Financial services/real estate      170      199   17.1
Total operating revenues         39 213   41 106    4.8

Operating income

Domestic tobacco                  2 244    2 390    6.5
International tobacco             2 683    2 800    4.4
International food                  514      547    6.4
North American food               1 788    1 889    5.6
Beer                                314      346   10.2
Financial services/real estate      110      127   15.5
Total operating income            7 653    8 099    5.8

Source: Philip Morris