Kellogg Reports Strong Rise in Q2, Reaffirms Full-Year Earnings Guidance
02 Aug 2013 --- Kellogg Company has announced second quarter 2013 reported net sales of $3.7 billion, an increase of 6.9 percent from the second quarter of 2012. Internal net sales, which exclude the effects of foreign currency translation, acquisitions, dispositions, and integration costs, decreased by 0.5 percent over the same period.
Quarterly operating profit was $570 million, a reported increase of 9.6 percent; underlying internal operating profit increased by 3.4 percent. The growth in operating profit was achieved despite the continued effect of higher net inflation. Underlying internal results exclude the effects of foreign currency translation, acquisitions, dispositions, mark-to-market accounting, and integration costs.
Reported second quarter 2013 earnings were $352 million, or $0.96 per diluted share, an increase of seven percent from the earnings of $0.90 per diluted share reported in the second quarter of 2012. Comparable earnings, which exclude the impact of mark-to-market accounting and the integration costs associated with the acquisition of Pringles, were $1.00 per share; this result represents 5.3 percent growth from comparable earnings of $0.95 last year. This quarter's reported earnings included $0.03 per share of integration costs associated with last year's acquisition and $0.01 per share of commodity-related mark-to-market impact.
"We are reaffirming our full-year earnings guidance on a currency-neutral basis," saidJohn Bryant, Kellogg Company's president and chief executive officer. "While sales growth has been slower than we anticipated in developed markets, particularly the U.S., the work we have been doing on our cost base has enabled us to offset the impact. In addition, we have now owned Pringles for more than a year. The integration has gone very well, and we remain excited regarding the opportunities we see for future growth."
Kellogg North America's reported net sales increased by 3.3 percent to $2.4 billion in the second quarter; internal net sales decreased by 1.6 percent. The U.S. Morning Foods segment posted a decline in reported and internal net sales of 3.3 percent. Reported net sales increased by eight percent in the U.S. Snacks business; internal net sales declined by 3.2 percent. The U.S. Specialty segment posted reported net sales growth of 8.1 percent and internal net sales growth of 1.9 percent. The North America Other segment reported net sales growth of five percent and internal net sales growth of 3.9 percent as the result of strong growth in the Frozen Food business. Second quarter North American reported operating profit increased by six percent; internal operating profit* increased by 3.2 percent.
The Latin American business posted reported net sales growth of 11.3 percent and internal net sales growth of five percent in the quarter. European reported net sales increased by 17.9 percent; internal net sales decreased by 0.3 percent due to the difficult operating environment in the region. Reported net sales increased by 10 percent in the Asia Pacific segment; internal net sales increased by 4.1 percent, as the result of growth in Australia and strong double-digit growth in both South East Asia and India.
The company reaffirmed its guidance for full-year earnings per share of $3.84 to $3.93 per share on a currency-neutral basis, excluding integration costs and the impact of mark-to-market accounting. Previous guidance of $3.82 to $3.91 included $0.02 of negative impact from currency translation. Reported earnings per share are now expected to include a negative impact from currency translation of $0.09 per share, a $0.07 increase from previous guidance. Reported sales growth is now expected to be approximately five percent; this change is due to the slower-than-expected growth in developed markets, particularly the U.S., and the negative impact of currency translation. The company continues to expect that full-year cash flow will be between $1.1 and 1.2 billion.
