The company posted these better than expected results despite ongoing cost pressures and the challenging economic environment. Second-quarter net earnings were $354m, a 13% increase from last year’s second-quarter net earnings of $312m. Earnings per diluted share were $0.92 for the quarter, a year-over-year increase of 12% on a reported basis and 23% higher on a currency neutral basis despite higher up-front costs.
“We remain committed to delivering sustainable and dependable performance as we work through the current tough economic environment,” said David Mackay, Kellogg’s CEO. “This focus continued to provide strong returns in the second quarter, which were ahead of expectations. We now enter the second half of the year with increased confidence in our ability to deliver on our long-term targets, as well as the visibility and flexibility to increase our investments for future growth.”
Kellogg Company is on track to deliver $1bn in annualised savings from efficiency initiatives by year-end 2011. In addition, the company announced that it plans to increase up-front cost investments for savings initiatives to approximately $0.26 per share for 2009 while increasing current 2009 earnings per share guidance.
Second-quarter reported net sales were $3.2bn, representing a 3% decrease vs the second quarter of 2008. However, internal net sales growth, which excludes the effects of foreign currency translation and acquisitions, rose 3%, in line with the company’s long-term annual growth targets. Kellogg North America posted second-quarter net sales growth of 2% on a reported basis and 3% on an internal basis.
Internal net sales growth for Kellogg North America consisted of internal net sales growth delivery from North America Retail Cereal of 4%, North America Frozen and Specialty Channels of 5%, and North America Snacks of 3%. While second-quarter top-line growth for North America Snacks was negatively impacted by the peanut-related recall, most of the previously affected products returned to the marketplace by quarter end.
Kellogg International posted a second-quarter net sales decline of 13% on a reported basis. However, net sales grew 2% on an internal basis, which excludes the effects of currency translation and acquisitions.
Operating profit for the second quarter of $553m was a solid 4% increase on a reported basis, and a strong 14% increase on an internal basis. Total up-front costs for cost-reduction initiatives totaled approximately $0.07 per share, outpacing 2008’s second-quarter up-front costs of $0.04 per share. Second-quarter 2009 gross margin of 43.5% represents a 30 basis points increase over last year’s second quarter on a reported basis.
Kellogg Company continued to deliver strong cash flow, generating $535m during the first half of 2009, including an unfavourable impact from foreign exchange. This cash flow, defined as cash from operating activities less capital expenditures, surpasses the 2008 first half cash flow of $510m.
CEO Mackay concluded: “With strong brands, solid business fundamentals and our focus on managing the business for the long-term, Kellogg Company is well positioned in the marketplace to continue delivering sustainable and dependable performance.”
Source: Kellogg Company
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