Kraft Foods Inc., the nation's largest food and beverage maker, said Wednesday its first-quarter earnings dropped 13 percent amid higher costs for the ingredients that go into its products.The profit decline also occurred because a year earlier, first-quarter earnings were boosted by a one-time benefit related to Kraft's spinoff from the Altria Group Inc. The maker of Oscar Mayer hot dogs, Maxwell House coffee and Oreo cookies did benefit from across-the-board price increases of its products, with sales jumping 21 percent.

The Northfield, Ill.-based company's earnings for the January-March period were $608 million, or 40 cents per share, down from $702 million, or 43 cents per share, a year earlier.

Excluding certain items, Kraft earned 44 cents per share, the same as a year earlier, the company said.



Analysts surveyed by Thomson Financial had expected earnings of 40 cents per share.

Revenue rose to $10.37 billion from $8.59 billion, with an 8 percent boost from acquisitions and 5 percent from the weak dollar. That was $600 million better than analysts' consensus estimate.

In premarket trading, Kraft shares rose 46 cents to $31.23.

Chairman and Chief Executive Irene Rosenfeld said the results reflect continued momentum as Kraft enters the second year of a three-year turnaround plan.

"Our brands got stronger, our market share increased, our investments continue to pay off, and our margins improved sequentially from the fourth quarter," she said on a conference call.

Soaring dairy and other commodity costs and a weakened economy have weighed on Kraft's results in recent quarters. The company had refrained from raising prices on its products to offset higher input costs until recently, instead spending heavily in its major categories in order to improve brand recognition.

Kraft now expects 2008 revenue growth of at least 5 percent, up from an earlier estimate of 4 percent growth, and still anticipates full-year adjusted earnings of $1.90 per share.

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