Kellogg Says Making Progress to Ensure Foods Are “On Trend” As Sales Fall in Quarter
05 Aug 2016 --- Kellogg has reported a 6.6 percent fall in second quarter revenues to $3.27bn while profits dipped at its key US snacks business in the period.
The Special K and cornflakes maker saw operating profits fall across its US snacks business from $160m to $69m in the quarter but profits were up across its US Morning Foods from $131m to $165m in the period.
Overall, Kellogg reported $280m in net income in the second quarter, up from $222m the year previous.
"We're making good progress on our priorities: We have continued to improve our foods to insure they are on trend; we've continued to expand the Pringles business worldwide; we're enhancing our sales capabilities; and we are designing and executing productivity initiatives that are contributing to more profit-margin expansion than we previously anticipated," said John Bryant, Kellogg chairman and chief executive officer.
"We have carefully constructed a plan to boost our profit margins higher and sooner, giving us enhanced earnings visibility.”
Kellogg is looking to revamp its portfolio of cereals to adjust to changing consumer tastes, including Millennials shifting away from eating breakfast cereals.
The U.S. Morning Foods segment posted a net sales decline but its six core cereal brands held all-channel share and the segment's profit margins improved strongly.
The U.S. Snacks segment posted a net sales decline but core brands like Cheez-It, Pringles, and Rice Krispies Treats continued to post consumption growth.
The U.S. Specialty Channels segment posted a slight increase in net sales in the quarter, with growth in key brands and channels, and increased profit margins.
The North America Other segment, which is composed of the U.S. Frozen Foods, Kashi, and Canadian businesses, posted a decrease in net sales, amidst price elasticity in Canada, and portfolio rationalization and food and packaging transitions in Frozen Foods and Kashi.
Kellogg Europe posted a decrease in reported net sales in the quarter, driven mainly by currency translation; currency-neutral comparable net sales were flat year-over-year, as broad-based growth in Pringles and wholesome snacks were offset by softness in U.K. cereal.
In Latin America, reported net sales decreased due to the translation effect of a sharply devalued Venezuelan currency; currency-neutral comparable net sales increased significantly because of inflationary Venezuela; excluding Venezuela, currency-neutral comparable net sales declined slightly, amidst difficult economic conditions.
Reported net sales in Asia Pacific decreased because of adverse currency translation; currency-neutral comparable net sales increased on good growth across the region for Pringles, and continued improvement in Australia, where the company gained share in cereal.
