Kellogg Announces Strong 2008 Performance

06 Feb 2009

Reported 2008 net sales increased 9% to $12.8 billion. Internal net sales growth, which excludes the effects of foreign currency translation, acquisitions and a 53rd week, was 5%. Fourth quarter internal sales growth was 3%.

06/02/09 Kellogg Company reported strong 2008 sales and earnings growth. Fourth quarter earnings per diluted share grew 7% to $0.47, bringing the 2008 full-year earnings per share to $2.99. The fourth quarter results include a 6 cent per share adverse effect due to the estimated impact of the recent peanut-related recall.

Reported net earnings for the full year were $1,148 million, a 4% increase over last year's $1,103 million. Full-year earnings per diluted share rose 8% to $2.99 versus the most recent estimate of $2.95 to $3.00. Reported earnings in the fourth quarter of 2008 were $179 million, or $0.47 per diluted share, compared to $176 million, or $0.44 per diluted share in the fourth quarter of 2007.

"Kellogg delivered another year of sustainable and dependable results, despite significant cost pressures and the stress the economy is placing on consumers," said David Mackay, Kellogg's chief executive officer. "We also continued to focus on cost savings initiatives and added to our platform for future growth with acquisitions in Russia, China, the U.S. and Australia."

Kellogg North America posted broad-based 2008 reported net sales growth of 9%; internal net sales growth was 6%. Sales strength was driven by solid innovation and price realization. Internal sales growth in the fourth quarter was 3%. North America Retail Cereal posted internal net sales growth of 3% for the full year and the Retail Snacks business posted internal net sales growth of 6%. North America Frozen and Specialty Channels businesses delivered full-year internal net sales growth of 9%.

Kellogg International also reported broad-based, 2008 full-year net sales growth of 9%, or 5% on an internal basis, which excludes the favorable effects of currency translation, acquisitions and a 53rd week. Internal sales growth in the fourth quarter was 4%. Full-year internal net sales in Europe and Latin America each increased 4%, while Asia Pacific internal sales rose 8%.

Operating profit in 2008 was $1,953 million, an increase of 5% on a reported basis and 4% on an internal basis. As anticipated, total up-front costs for cost-reduction initiatives were approximately $0.14 per share.

Cash flow, defined as cash from operating activities less capital expenditures, was $806 million for the year including a discretionary $300 million year-end retirement plan contribution ($400 million before tax). The Company also announced a $650 million share repurchase authorization for 2009. The previous $500 million authorization has been canceled.

Kellogg Updates 2009 Guidance

Kellogg is well positioned to drive sustainable and dependable performance. The Company provided updated 2009 guidance of 3-4% internal sales growth versus the prior estimate of mid single-digit growth. In addition, internal operating profit is projected to grow at a mid single-digit rate. Currently, the Company expects a six cent adverse earnings per share impact in 2009 from the peanut-related recall, which is included in the full-year guidance. The Company remains confident that it can achieve high single-digit EPS growth on a currency neutral basis, which excludes the effects of foreign currency translation.

CEO Mackay concluded, "We remain confident in our ability to deliver another year of sustainable and dependable performance. For 2009, we will focus on driving solid top-line growth as well as further cost-savings initiatives."