Kellogg’s operating profit fell 33.4% in its third quarter, largely impacted by the absence of its divested businesses’, multi-employer pension withdrawal and unfavourable currency translation.
A decline in its operating profit was expected, due to cost pressures and investments, and recognition of withdrawal liabilities related to the company’s exit from certain multiemployer pension plans.
The owner of Corn Flakes, Rice Krispies and Pop Tarts reported a 2.8% decline in net sales during the third quarter compared to the same period last year, predominantly due to divestitures in late July.
Kellogg’s said the absence of two months of results from firms that were divested – including its cookies, fruit snacks, pie crusts, and ice cream cones businesses – caused the company’s net sales to decline by nearly 4%, while adverse currency translation negatively impacted net sales by more than 1%.
However, these declines were offset by organic net sales growth which increased by 2.4% in the quarter, driven by Kellogg’s snack brands – in particular Pringles – and improved price realisation.
Geographically, Kellogg’s sustained growth momentum in both developed and emerging markets with regards to snacks, and accelerated growth in the developed market frozen sector.
In North America, net sales decreased by 6% while organic net sales growth was supported by consumption growth momentum in key brands such as Pringles, Cheez-It, Rice Krispies Treats, and Pop-Tarts. Kellogg’s also delivered net sales growth in its frozen food sector, led by increasing consumer awareness of plant-based meat alternatives to drive its MorningStar Farms brand.
Meanwhile, 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.
© FoodBev Media Ltd 2019