Kellogg’s profits take a hit

Posted by Nicole Eckersley on 4th November 2010

Falling sales in the US and overseas have hit third-quarter profits at US food group Kellogg, with the cereal giant announcing that net earnings dropped 6% to US$338 million for the quarter to 2 October.

Kellogg’s operating profit fell 4.5% to US$541 million. Operating profit in North America dropped 3% due to lower sales and higher advertising costs.

The Crunchy Nut maker’s operating profit from its overseas businesses decreased 11% due to lower earnings in Latin America and Asia Pacific.

Kellogg’s top-line also worsened during the quarter. The company’s reported net sales slid 4% to $3.2 billion on the back of a 3% fall in sales in North America and a 2% decrease in international sales.

“We are disappointed with our third quarter performance, which was due to softness in our businesses as well as a tough operating and deflationary environment driven by intense competition,” said CEO David Mackay.

“2010 has been a challenging year, and as a result, two weeks ago, we lowered our full-year guidance to reflect the operating challenges.”

For 2011, Kellogg expects internal net sales to grow in the “low single-digits”, in line with its long-term growth targets.

However, the company said internal operating profit is expected to be flat or, at worst, down 2%, reflecting its need “to reset incentive compensation levels”. Earnings per share on a currency-neutral basis are expected to grow by low single-digits.

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