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currency. These unfavorabilities were partially offset by the gain on the redemption of our UB investment, the impact of the UB acquisition and lower fixed
manufacturing costs.
Developing Markets
For the Years Ended
December 31,
$ change
% change
2007 2006
(in millions)
Net revenues $ 5,348 $ 4,566 $ 782 17.1%
Segment operating income 491 416 75 18.0%
For the Years Ended
December 31,
$ change
% change
2006 2005
(in millions)
Net revenues $ 4,566 $ 4,106 $ 460 11.2%
Segment operating income 416 400 16 4.0%
2007 compared with 2006:
Net revenues increased $782 million (17.1%), due primarily to favorable currency (5.4 pp), higher net pricing (5.1 pp), higher volume (4.0 pp), and favorable
mix (2.4 pp). In Eastern Europe, Middle East & Africa, net revenues increased due to higher pricing and growth in coffee and chocolate in Russia, Romania and
Ukraine, and in refreshment beverages and snacks for the Middle East & Africa. In Latin America, net revenues increased due to higher pricing and favorable
volume/mix, particularly in Brazil, Venezuela and Argentina. In Asia Pacific, net revenues increased due to volume growth in China and Southeast Asia.
Segment operating income increased $75 million (18.0%), due primarily to higher pricing, favorable volume/mix, lower Restructuring Program costs, favorable
currency and a 2006 asset impairment charge related to the biscuits assets in Egypt. These favorable variances were partially offset by higher marketing,
administration and research costs (including higher marketing support costs) and higher commodity costs.
2006 compared with 2005:
Net revenues increased $460 million (11.2%), due to favorable volume/mix (5.2 pp, including the 53rd week in 2005), higher pricing (4.4 pp) and favorable
currency (2.1 pp), partially offset by the impact of divestitures (0.5 pp). In Eastern Europe, Middle East & Africa, net revenues increased due to volume growth
and higher pricing in coffee and chocolate in Russia, Romania, Ukraine and Bulgaria. In Latin America, net revenues increased due to higher pricing and
favorable volume/mix, particularly in Brazil, Venezuela and Argentina. In Asia Pacific, net revenues increased due to volume growth and higher pricing in China
and Southeast Asia, partially offset by volume declines in Australia and New Zealand.
Segment operating income increased $16 million (4.0%), due primarily to higher pricing, net of unfavorable costs, favorable volume/mix (including the
53rd week in 2005) and favorable currency partially offset by higher marketing, administration and research costs, higher Restructuring Program costs, higher
fixed manufacturing costs and an asset impairment charge related to biscuits assets in Egypt.
Critical Accounting Policies
Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements includes a summary of the significant accounting policies we used
to prepare our consolidated financial statements. We prepare our financial statements in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”), which require us to make certain elections as to our accounting policy, estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of net revenues and
expenses during the reporting periods. Significant accounting policy elections, estimates and assumptions include, among others, pension and benefit plan
assumptions, lives and valuation assumptions of goodwill and intangible assets, marketing programs and income taxes. Actual results could differ from those
estimates.
We have discussed the selection and disclosure of our critical accounting policies and estimates with our Audit Committee. The following is a review of the more
significant assumptions and estimates, as well as the accounting policies we used to prepare our consolidated financial statements.
32
Source: KRAFT FOODS INC, 10-K, February 25, 2008 Powered by Morningstar® Document Research℠