Kellogg tops estimates as food inflation remains soft

Posted by Daniel Palmer on 30th October 2009

The world’s largest cereal maker, Kellogg Company, has reported a year-on-year 6% surge in earnings for the third quarter but sales were down slightly due to the impact of foreign currency translation.
“The current economic environment has placed significant pressure on our consumers,” David Mackay, Kellogg Company CEO, said. “However, the environment also provided us with both the incentive and the opportunity to build an even stronger company for the future. We are aggressively pursuing productivity initiatives, as well as taking advantage of media deflation and efficiency programs to invest even more back into advertising to further drive the long-term health of our brands.”

Internal net sales growth, which excludes the effects of foreign currency translation and acquisitions, rose 3%, with Kellogg North America posting net sales growth of 1% and Kellogg International recording a 6% increase in sales on an internal basis. Their performance in Asia Pacific was roughly in line with the rest of their business, with sales up 4 per cent on an internal basis.

“Our businesses in South Korea, Australia and India delivered strong internal net sales growth,” Mr Mackay advised during a conference call.

Kellogg Raises Full-Year 2009 Guidance

Kellogg re-affirmed its internal sales growth guidance of 3 – 4% for full-year 2009, and they have raised profit forecasts on the basis that margins have improved due to “strong productivity gains and slightly lower than expected inflation”.

Similar performance is expected in 2010, with internal sales growth in the range of 2-3%.

“Although most aspects of our guidance for both 2009 and 2010 are above our long-term targets, we are pragmatic about the challenging environment we face. Hence, we are focused on continued reinvestment into our brands, as well as optimizing our business model and global organization — while achieving cost savings and future visibility. We therefore remain confident in our ability to continue delivering sustainable, dependable performance in the future,” Mr Mackay concluded.