Kellogg operating profit dips 25.4% as cereal sales continue to fall

USA – The Kellogg Company recorded an operating profit drop of 25.4% in its first-quarter results, as falling cereal sales and “business realignment costs” marked a difficult start to the year for the company, according to FoodBev report.

Following the release of the results, Kellogg’s – which owns major brands such as Corn Flakes, Rice Crispies and Pop Tarts also announced that its chief financial officer Fareed Khan is leaving the business, and he will be succeeded by Amit Banati, who is currently president, Kellogg Asia Pacific, Africa & Middle East (AMEA).

On a reported basis, Kellogg’s cereal sales in North America fell 5%, with the company blaming “continued category softness”, due in part to changing consumption habits as consumers switch to snack bars and other breakfast options, while the transition to new pack sizes and the timing of shipments also affected cereal sales.

Overall North American net sales in the quarter decreased by approximately 2% year-on-year, as the growth of brands such as Pringles, Cheez- Itz, Rice Krispies Treats, and Pop-Tarts through portfolio updates was offset by a significant recall of RXBAR snacks bars during the quarter.

Despite this, Kellogg’s reported net sales for the quarter increased 3.5% year-on-year to US$3.52 billion, driven predominantly by acquisitions and the strong performance of Kellogg’s international divisions.

In particular, the company claimed that the consolidation of Nigerian distributor Multipro in May 2018 contributed to a 60% rise in net sales growth in the company’s AMEA unit, also boosted by rising Pringles sales across the region.

“Coming out of Q1, we remain squarely on strategy and on plan.

“We improved our top-line growth through more and better innovation, momentum on revitalised brands, and continued expansion in emerging markets,” said Steve Cahillane, Kellogg Company’s chairman and CEO.

“We also restructured our organization for greater agility, and further reshaped our future portfolio by reaching an agreement to sell certain brands later this summer.

“Meantime, we overcame some unexpected headwinds in our North America business in Q1 and delivered earnings that keep us on track for the year’s financial targets.”

On the appointment of Banati as the company’s new CFO, Cahillane added: “We are pleased to be able to succeed Fareed with a Kellogg executive as outstanding as Amit Banati.

“With his strategic vision, operational discipline, and financial acumen, Amit has been a driving force behind the transformation of our business in AMEA.”

He noted that this region is on a path to more than double in size, in both net sales and operating profit, since Amit became its President, and has shown top-line and bottom-line growth.

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