Kellogg reports 4.2% growth in sales as restructuring costs bite in the Q4

USA – The Kellogg Company has posted 5.4% rise in sales growth for the year 2018 even as the fourth quarter continued to feel the impact of the costs of ongoing restructuring at the company.

Sales in the fourth quarter grew 4.2% but were largely affected by the effects of a strong dollar and preparations for Brexit.

In the year period running to December 30, net sales reached US$13.55 billion, compared to US$12.85 billion in the previous year.

The results indicate that the company is slowly recovering from a long stretch of sales decline and dwindling profits, enabled by cost-saving measures and supply chain optimization.

Operating profit increased by 23% to reach US$1.71 billion in the year but for the fourth quarter, it dropped down to US$326 million.

Kellogg, which makes Pringles chips, Eggo waffles, Pop-Tarts and a range of breakfast cereals has struggled in recent years with intense pricing pressure from retailers and growing consumer preference for healthier, fresher food.

To drive cereal sales, Kellogg has been spending more on advertising and promotions.

“2018 was an important year for us, in which we pivoted to growth after successfully reducing our cost structure in recent years.

“We launched Deploy for Growth, a strategy that gives us clarity on priorities, and has us taking decisive actions to return our company to sustainable top-line growth.

“We still have a lot of work to do, but we have made great strides toward reshaping our portfolio toward growth, revitalising key brands, and developing capabilities. Our stabilisation of a declining net sales trend and our improved in-market performance around the world are clear signs of this progress.

This investment and progress will be evident again in 2019, setting us on a path for sustainable, profitable growth over time,” said CEO Steven A. Cahillane.

Full-year profit grew 23% on the back of lower restructuring charges and the positive impact seen from Kellogg’s acquisition of protein bar brand Rxbar in October 2017.

In May 2018, the company acquired a stake in packaged food manufacturer Tolaram Africa Foods (TAF), a subsidiary of its joint venture with Singapore-based Tolaram for US$420 million.

Kellogg’s saw a decline in US snacks and morning foods divisions, offset by robust growth in the ‘North America other’ segment, which includes Rxbar as well as US frozen foods, Kashi, and Kellogg’s Canadian business.

Asia Pacific recorded 60% increase in sales while Europe posted a near-5% increase in sales.

Brexit looming

As Brexit looms, Britain’s economy risks stalling or contracting and some of British companies are cutting down jobs amidst declining economy.

The industry has also had to cope with surging raw material and freight costs over the past year, and global political unrest that is impacting consumer sentiment.

Cahillane said Kellogg was investing to mitigate potential damage from Britain leaving the European Union on March 29.

“Brexit is a very, very uncertain geopolitical situation. Probably the most uncertain geopolitical issue that companies are facing right now,” he said.

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