Kellogg also announced that it plans to increase up-front cost investments for cost savings initiatives from the original expectation of $0.14 per share to approximately $0.22 per share for 2009, while still maintaining current 2009 earnings per share guidance. These investments will help enable the company to deliver its goal of reducing annual costs by $1bn by the end of 2011.
First-quarter net earnings were $321m, a 2% increase from last year’s $315m. First-quarter reported earnings per diluted share were $0.84, a 4% increase on a reported basis and a 14% increase on a currency neutral basis. First-quarter results included an estimated $0.05 per share impact due to the cost of the recent peanut-related recalls.
“By remaining focused on our business model and strategy, we performed ahead of our expectations during the first quarter despite cost pressures and the difficult economic environment,” said David Mackay, Kellogg’s CEO. “We also continue to focus on cost-savings initiatives and reinvestment for the future. We now plan to increase our up-front cost investments to achieve our ambitious $1bn savings target.”
First-quarter reported net sales decreased 3% to $3.2bn. Internal net sales growth, which excludes the effects of foreign currency translation and acquisitions, rose 4%. Kellogg North America posted first-quarter reported net sales growth of 3%; internal net sales growth was 4%. North America Retail Cereal delivered internal net sales growth of 6% for the quarter. Retail Snacks posted internal net sales growth of 2%, which was negatively impacted by the peanut-related recalls. North America Frozen and Specialty Channels businesses together delivered internal net sales growth of 6%.
Kellogg International posted a first-quarter 2009 reported net sales decline of 14%. However, net sales growth for Kellogg International was 4% on an internal basis, which excludes the effects of currency translation and acquisitions. First-quarter internal net sales growth in Europe was 1% and was negatively impacted by some challenging retailer negotiations, which have now been resolved. Latin America internal net sales increased 8%, while Asia Pacific internal net sales rose 11%.
First-quarter operating profit was $529m, a 3% decline on a reported basis. However, on an internal basis, it was a strong 7% increase. Total up-front costs for cost-reduction initiatives were approximately $0.03 per share, in line with the first quarter of last year.
Cash flow, defined as cash from operating activities less capital expenditures, was $172m for the quarter, including the unfavourable impacts of foreign exchange and the timing of interest payments.
CEO Mackay added: “Our strong start increases our visibility with respect to another year of sustainable and dependable performance. For 2009, we’ll focus on driving solid top-line growth, considerable cost savings and strong reinvestment.”
Source: Kellogg Company
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