Kraft 2004 Annual Report Download - page 36

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Net revenues decreased $80 million (1.5%), due to lower volume/mix ($105 million), partially offset
by higher pricing ($25 million, including the impact of increased promotional spending).
Operating companies income decreased $123 million (10.5%), due primarily to lower volume/mix
($102 million), higher fixed manufacturing costs ($70 million) and unfavorable costs, net of higher pricing
($38 million, including higher commodity costs and increased promotional spending), partially offset by
lower marketing, administration and research costs ($78 million) and the impact of 2002 pre-tax charges
for asset impairment and exit costs ($9 million).
Kraft International Commercial
For the Years Ended
December 31,
2004 2003 2002
(in millions)
Volume (in pounds):
Europe, Middle East & Africa ............................. 2,915 2,953 2,943
Latin America & Asia Pacific .............................. 2,273 2,295 2,366
Volume (in pounds) ..................................... 5,188 5,248 5,309
Net revenues:
Europe, Middle East & Africa ............................. $ 7,522 $7,014 $6,174
Latin America & Asia Pacific .............................. 2,586 2,547 2,585
Net revenues .......................................... $10,108 $9,561 $8,759
Operating companies income:
Europe, Middle East & Africa ............................. $ 683 $1,002 $ 953
Latin America & Asia Pacific .............................. 250 391 513
Operating companies income ............................. $ 933 $1,393 $1,466
2004 compared with 2003
The following discussion compares Kraft International Commercial’s operating results for 2004 with
2003.
Volume decreased 1.1%, due primarily to the impact of the divestiture of a rice business and a
branded fresh cheese business in Europe in 2003, as well as price competition and trade inventory
reductions in several markets, partially offset by the impact of acquisitions.
Net revenues increased $547 million (5.7%), due primarily to favorable currency ($674 million), the
impact of acquisitions ($23 million) and favorable volume/mix ($23 million), partially offset by the impact
of divestitures ($126 million) and increased promotional spending, net of higher pricing ($47 million).
Operating companies income decreased $460 million (33.0%), due primarily to the pre-tax charges
for asset impairment and exit costs ($206 million), unfavorable costs and increased promotional
spending, net of higher pricing ($113 million), higher marketing, administration and research costs
($92 million, including higher benefit costs and infrastructure investment in developing markets), the
2004 equity investment impairment charge relating to a joint venture in Turkey ($47 million), the
unfavorable net impact related to gains and losses on the sales of businesses ($34 million), the impact of
divestitures ($18 million) and the 2004 implementation costs associated with the restructuring program
($10 million), partially offset by favorable currency ($69 million).
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