Kellogg’s reports decline in profits amid lower sales in North America

USA – Kellogg’s, the Corn Flakes and Rice Krispies owner reported a 33.4 percent decline in profits in its third quarter as net sales in its largest market, North America, declined by 6%.

The company’s net sales dropped 2.8% to US$3.37 billion for the quarter, down from US$3.47 billion posted an a year earlier but slightly more than expectations from analysts polled by FactSet.

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The company’s performance on a year-over-year basis was also impacted by planned divestitures and adverse currency volatility.

However, organic sales from North America frozen foods segment rose 0.6%, with double-digit jump in demand for MorningStar Farms brand while cereals volumes in the market remained a drag despite the company’s move to standardize pack sizes and launch products such as new Happy Inside and Pop-Tarts cereals.

Kellogg’s has been stepping up efforts to attract health-conscious consumers with plant-based and probiotic products as they shun sugary cereals that used to be a staple in American breakfast tables.

The company plans to launch new brand Incogmeato, which includes ready-to-cook plant-based burger, at grocery stores in early 2020.

Kellogg’s recorded strong growth in its Asia Pacific, Middle East and Africa (AMEA) region, with a 6% increase in net sales, featuring growth in snacks, cereal, and noodles. Kellogg AMEA recorded a 15% increase in reported operating profit.

Despite the hit to operating profits, chairman and CEO of Kellogg Company Steve Cahillane said: “We remain squarely on strategy and on plan, and this is reflected in our third quarter results. Our reshaped portfolio is doing what it is intended to do, focusing on our higher growth categories and markets.

“We have revitalized key brands through improved brand-building and enhanced innovation. And, as we move past our heaviest investments and costs, we are on track for delivering gradual improvement in profitability. While fully recognizing that we still have work to do, I’m very pleased with our progress.”

The Kellogg Company has reaffirmed its full-year financial guidance and expects to deliver 1-2% net sales year-on-year growth on both a currency-neutral and organic basis.

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