Kellogg raises outlook after strong first quarter
Kellogg raises outlook after strong first quarter
Kellogg Company, based in Battle Creek, Michigan, reported a strong first quarter performance that has enabled the company to raise its full-year outlook. According to Steven A. Cahillane, the Chairman, President, and CEO of the company, the improved first-quarter performance has placed Kellogg in an enviable position. Speaking to investment analysts on May 4, Cahillane indicated that the company benefited from the easing of bottlenecks and shortages more quickly than anticipated, as well as improving service levels. "We continue to grow net sales organically above our long-term targets, and this growth spans across our regions and our category groups,” he said. “We also continue to make progress toward recovering our profit margins."
Kellogg raises outlook after strong first quarter
The company reported a net income of $298 million in the first quarter, equal to 87¢ per share on the common stock, which is a 29% drop from $422 million, or $1.24, in the same period last year. However, sales were $4.05 billion, which represents a 10% increase from $3.67 billion. The decrease in earnings versus a year ago reflected numerous unusual items, including a negative year-on-year swing in mark-to-market impacts and incremental up-front costs related to the pending separation of the cereal business together with lower pension income, higher interest expense, and adverse foreign currency translation. Adjusted for one-time items and currency translation, adjusted earnings per share were up 3%.
Kellogg reported strong net sales growth across each of its regions, thanks to inflation-driven price realization. Kellogg raises outlook after strong first quarter By category, Kellogg’s growth drivers were global snacks, noodles in Africa, and recovering cereal sales in North America. Of the sales increase, price/mix contributed 15.6 percentage points while currency was a 3.3-point drag, and volume was down 1.9%.
Cahillane said that the result was better operating profit than expected, prompting management to raise its full-year outlook. First-quarter operating profit in North America was \$366 million, up 8% from \$399 million a year earlier. Sales were $2.39 billion, up 13% from $2.11 billion a year earlier. Volume was down negligibly, with essentially the entire gain accounted for by price/mix.
Snacks sales in North America were up 15% in the first quarter, and the company attributed the modest growth in frozen foods sales to supply disruptions in the Eggo frozen breakfast business and the company’s Morningstar Farms business. "The cereal category grew at a double-digit rate in the quarter, and we gained nearly three points of share year-on-year," said Cahillane. He noted that the resumed commercial activity is producing share gains across the portfolio led by Rice Krispies, Special K, Raisin Bran, and Frosted Flakes.
Kellogg raises outlook after strong first quarter
For the full year, Kellogg has raised its financial guidance in the wake of the first-quarter results. The company now expects net sales growth in a range of 6% to 7%, up from previous guidance of 5% to 7%. Operating profit is expected to rise 8% to 10%, up 1 percentage point on both sides. Earnings per share are expected to decrease 1% to 3%, versus previous guidance down 2% to 4%. Kellogg is taking a cautious view of its sales growth prospects later in the year, assuming decelerating growth as the year progresses.