Kraft 2005 Annual Report Download - page 40

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Operating companies income was equal to the prior year, as lower fixed manufacturing costs
($17 million) and higher volume/mix ($10 million) were offset by the 2004 pre-tax charges for asset
impairment and exit costs ($8 million), the 2004 implementation costs associated with the restructuring
program ($6 million), higher marketing, administration and research costs ($5 million) and unfavorable
costs, net of higher pricing.
U.S. Snacks & Cereals. Volume increased 1.5%, as higher salted snacks and biscuits volume was
partially offset by a decline in cereals. Salted snacks volume increased due to consumer nutrition trends
and marketing programs in nuts. In biscuits, volume increased, driven by new product introductions. In
cereals, volume declined due to low carbohydrate diet trends, which impacted the category, and
increased competitive activity.
Net revenues increased $68 million (1.3%), due primarily to higher volume/mix ($62 million) and
higher pricing ($11 million, including the absence of high product returns associated with new products
incurred in 2003, partially offset by increased promotional spending). In snacks, higher net revenues
were due primarily to increased shipments of snack nuts due to consumer nutrition trends. Biscuit net
revenues were higher due to the impact of lower product returns, partially offset by higher promotional
spending. Cereals net revenues decreased due to lower shipments caused by consumer nutrition trends
and increased competitive activity.
Operating companies income decreased $309 million (29.5%), due primarily to the 2004 pre-tax
charges for asset impairment and exit costs ($222 million), unfavorable costs, net of higher pricing
($62 million, due to higher commodity costs and increased promotional spending), higher marketing,
administration and research costs ($47 million) and the 2004 implementation costs associated with the
restructuring program ($18 million), partially offset by lower fixed manufacturing costs ($40 million).
Kraft International Commercial
For the Years Ended
December 31,
2005 2004 2003
(in millions)
Volume (in pounds):
Europe, Middle East & Africa ............................ 2,862 2,915 2,953
Latin America & Asia Pacific ............................. 2,263 2,273 2,295
Volume (in pounds) .................................... 5,125 5,188 5,248
Net revenues:
Europe, Middle East & Africa ............................ $ 7,999 $ 7,522 $7,014
Latin America & Asia Pacific ............................. 2,821 2,586 2,547
Net revenues ......................................... $10,820 $10,108 $9,561
Operating companies income:
Europe, Middle East & Africa ............................ $ 798 $ 683 $1,002
Latin America & Asia Pacific ............................. 324 250 391
Operating companies income ............................ $ 1,122 $ 933 $1,393
2005 compared with 2004
The following discussion compares Kraft International Commercial’s operating results for 2005 with
2004.
Volume decreased 1.2% including the benefit of 53 weeks in 2005 results. Excluding the 53rd week
of shipments in 2005 and the impact of divestitures, volume decreased approximately 2%, due primarily
to the effect of commodity-driven pricing.
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