Kellogg’s profit up 19% as US segments hurt revenues in the quarter

USA – The Battle Creek, Michigan based Kellogg Company has posted a profit of US$396 million for the third quarter of 2018, a 19% increase comparable to the same period in 2017.

Results released by the cereal and convenience food firm however indicated losses across several US segments and increasing extra costs which all cut into profits for the period under review.

Earnings per share rose 31% from last year to US$1.09 while sales rose nearly 7% to US$3.5 billion as a result of the impact from the acquisition of RXBAR protein bars for US$600 million.

Sales were also boosted by consolidation of its Nigerian distributor, Multipro.

Organic sales rose by 0.4% weighed down by the strong dollar and currency fluctuations which cut significant points off its total sales.

In the US market, cereal sales declined with its morning foods division, which houses Kellogg’s cereal brands and was once the company’s largest in terms of revenue, saw sales fall 1.3% year-on-year to US$683m.

Its cereal brands include Corn Flakes and Fruit Loops.

“Cereal consumption and share were impacted by the June recall of Honey Smacks, which masked improving performance elsewhere in the portfolio,” the company said.

Its US snacks business, the company’s biggest unit including Pringles chips brands saw a 3.5% decline in sales to US$737 million while US speciality channels, which sells Bear Naked Granola, saw sales drop 1.3% to US$288m.

Net income increased to US$380 million reflecting the benefits of lower taxes following the tax reforms implemented by the US government last year.

Profit warning

The company said it expects its full-year adjusted earnings per share to increase between 7-8% on a currency-neutral basis, down from 11-13% increase it had previously forecast.

“In the third quarter, we boosted investment behind our brands, capabilities, and new pack formats,” said Steve Cahillane, chairman and chief executive.

“Despite their near-term impact on profit, we’ll continue making these investments in the fourth quarter because we know they are putting us on a path for sustainable growth over time.”