Kraft 2006 Annual Report Download - page 45

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($5 million), partially offset by lower marketing spending ($48 million), lower fixed manufacturing costs ($10 million), lower implementation costs
($10 million), higher pricing, net of increased promotional spending and unfavorable product costs ($8 million), favorable volume/mix ($7 million, including the
53rd week in 2005) and favorable currency ($6 million).
European Union. Volume increased 2.0%, despite the 53 rd week of shipments in 2005 (representing approximately 2 percentage points of decline), due
primarily to the acquisition of UB, partially offset by lower shipments across several sectors and the divestiture of the U.K. desserts assets in the first quarter of
2005. Snacks volume increased due primarily to the acquisition of UB and higher confectionery shipments, particularly in Poland. Convenient meals volume was
up due primarily to the acquisition of UB, partially offset by lower shipments in Germany and the Nordic area. Grocery volume declined due primarily to the
divestiture of the U.K. desserts assets and lower shipments in Germany, partially offset by the acquisition of UB. In beverages, coffee volume declined across
most countries except Germany and refreshment beverages shipments were lower. In cheese & dairy, volume decreased due to lower shipments in Germany and
Italy.
Net revenues decreased $42 million (0.6%), due primarily to unfavorable currency ($93 million), unfavorable volume/mix ($53 million, including the
53rd week in 2005) and the impact of divestitures ($12 million), partially offset by the acquisition of UB ($110 million) and higher pricing, net of increased
promotional spending ($6 million). In cheese & dairy, net revenues decreased due to lower shipments, unfavorable currency and lower net pricing. Grocery net
revenues declined due to unfavorable currency and the impact of the divestiture of the U.K. desserts business, partially offset by the acquisition of UB. In
beverages, net revenues declined due to unfavorable currency and lower coffee and refreshment beverage shipments, partially offset by commodity-related
pricing and favorable mix in coffee. Convenient meals net revenues also decreased, due to unfavorable currency and lower shipments, partially offset by the
impact of the acquisition of UB. Snacks net revenues increased due primarily to the acquisition of UB for biscuits and higher shipments and pricing in
confectionery, partially offset by unfavorable currency.
Operating companies income decreased $174 million (24.1%), due primarily to higher pre-tax charges for asset impairment and exit costs ($273 million,
including $170 million of asset impairment charges related toTassimo), the gain on the sale of U.K. desserts assets in 2005 ($115 million), unfavorable costs and
increased promotional spending, net of higher pricing ($31 million), higher marketing, administration and research costs ($17 million, including costs associated
with the 53rd week in 2005) and unfavorable currency ($14 million), partially offset by the 2006 gain on the redemption of the Company's outstanding investment
in UB ($251 million), the impact of the acquisition of UB ($18 million) and lower fixed manufacturing costs ($14 million).
Developing Markets, Oceania & North Asia. Volume decreased 0.9%, including the 53 rd week of shipments in 2005 (representing approximately
2 percentage points of decline), as lower volume in Asia Pacific was partially offset by growth in Eastern Europe and Latin America. In cheese and dairy, volume
declined in Asia Pacific, partially offset by higher shipments in the Middle East. Grocery volume declined due to lower shipments in Brazil, Mexico, Venezuela
and the Middle East. In beverages, volume declined due to the discontinuation of a product line in Mexico and lower shipments in Southeast Asia and the Middle
East, partially offset by higher coffee volume in Russia, Ukraine and Romania, and higher refreshment beverage volume in China. Snacks volume increased
driven by higher shipments in Brazil reflecting confectionery growth and gains in biscuits, and growth in Venezuela, Russia, Southeast Asia, Romania and
Ukraine. Convenient meals volume decreased slightly.
Net revenues increased $460 million (11.2%), due primarily to favorable volume/mix ($215 million, including the 53rd week in 2005), higher pricing
($178 million) and favorable currency ($85 million), partially offset by the impact of divestitures ($19 million). In snacks, net revenues grew due to higher
volume as well as favorable pricing in Latin America and favorable currency in Brazil. Confectionery net revenues also increased, due to growth in Russia and
Ukraine. Coffee net revenues increased due to
41
Source: KRAFT FOODS INC, 10-K, March 01, 2007