Kellogg Revenue Declines on Slow Cereal Sales

7 Feb 2014 --- Kellogg Company has announced that fourth quarter 2013 reported net sales were $3.5 billion, a decrease of 1.7 percent from the fourth quarter of 2012. Fourth quarter internal net sales decreased by 0.9 percent. Full-year 2013 reported net sales increased by 4.2 percent to $14.8 billion, an increase of $595 million from full-year 2012 results.

Full-year internal net sales increased by 0.3 percent. Internal results exclude the effects of foreign currency translation, acquisitions, dispositions, and integration costs.

Reported quarterly operating profit was $1.3 billion; this included significant mark-to-market adjustments which were driven by the impact that asset returns and changes in interest rates had on pension plans; underlying internal operating profit increased by 8.8 percent in the fourth quarter. Underlying internal results exclude the effects of foreign currency translation, acquisitions, dispositions, mark-to-market accounting, integration, and efficiency-and-effectiveness program (Project K) costs. Full-year reported operating profit increased by 81.6 percent; this also included mark-to-market adjustments and the inclusion of very strong results posted by Pringles for the full year. Full-year underlying internal operating profit increased by 1.3 percent.

Reported fourth quarter 2013 net earnings were $818 million, or $2.24 per diluted share. This quarter's reported earnings per share included a benefit from mark-to-market of $1.83 per share, $0.39 per share of costs associated with Project K, and approximately $0.03 per share of integration costs related to the acquisition of Pringles. Excluding these items, comparable earnings* were $0.83 per share, an increase of 18.6 percent from the fourth quarter of 2012's comparable earnings per share. Reported full-year 2013 net earnings were $1.8 billion, or $4.94 per diluted share. The full-year's reported earnings per share included a benefit from mark-to-market accounting of $1.72 per share, $0.42 per share of costs associated with Project K, and approximately $0.13 per share of integration costs related to the acquisition of Pringles. Excluding these items, comparable earnings were $3.77 per share, an increase of 4.4 percent from 2012's comparable earnings per share. Please see the appendices to this press release for tables detailing these items. Foreign currency translation lowered full-year earnings by $0.07 per share and by $0.02 per share in the fourth quarter.

"Our Pringles business had an excellent year in 2013, although we continue to face challenges in some of our developed cereal businesses," said John Bryant, Kellogg Company's president and chief executive officer. "We are executing our strategy, and we are also progressing very well with Project K, our four-year efficiency-and-effectiveness program. Our expectations are that, over time, Project K will begin to provide us the fuel we need to drive growth in our categories, and across our businesses, in the years to come."

Kellogg North America's reported net sales declined by 2.8 percent in the fourth quarter and increased by 1.9 percent for the full year. Internal net sales declined by 2.6 percent for the fourth quarter and by 0.9 percent for the full year. The U.S. Morning Foods segment posted a decrease in internal net sales of four percent in the fourth quarter and a decrease of 1.9 percent for the full year. U.S. Snacks posted a decline in internal net sales of 3.5 percent in the fourth quarter and a decline of 2.9 percent for the full year. The U.S. Specialty Channels business posted strong internal net sales growth of 5.1 percent in the fourth quarter and 4.1 percent for the full year. The North America Other business posted a decline in internal net sales of 2.9 percent in the fourth quarter and an increase of 2.2 percent for the full year.

North American reported operating profit decreased by 36.1 percent in the fourth quarter, primarily due to the effect of costs related to Project K. Reported operating profit declined by 6.2 percent for the full year. Underlying internal operating profit decreased by 2.9 in the fourth quarter and by 0.9 percent for the full-year.

Internal net sales growth in the Latin American business was three percent in the fourth quarter; internal growth for the full year was 5.5 percent. Internal net sales in our European business increased by 1.2 percent in the fourth quarter and by 1.7 percent for the full year. The Asia Pacific business posted internal net sales growth of 4.2 percent in the fourth quarter and three percent for the full year.