Kellogg’s Sees Dip in Sales & Profit in Q1

06 May 2015

06 May 2015 --- Like for like sales at the US cereal giant Kellogg’s were down by 5% with profit down 37.5% in the first quarter of 2015. Sales in all segments decreased, while all geographical areas, except Latin America, also saw sales dip.

First quarter 2015 reported net sales decreased by 5.0 percent to $3.6 billion, primarily due to the effect of currency translation. Currency-neutral comparable net sales decreased by 0.3 percent over the same period; this result included growth in each of the international regions. First quarter 2015 reported operating profit was $384 million, a decline of 37.5 percent; this decrease was driven primarily by the impact that asset returns and changes in interest rates had on pension plans. The decline in currency-neutral comparable operating profit was largely the result of slightly lower net sales.

Reported earnings for the first quarter of 2015 were $227 million, or $0.64 per share, a decrease of 43 percent from the $1.12 per share reported in the first quarter of last year. This quarter's reported earnings per share included negative impacts from mark-to-market of $0.13 per share and costs associated with the Project K efficiency and effectiveness program of $0.13 per share. In addition, reported results included $0.01 per share of integration costs related to the acquisition of Pringles and Bisco Misr and $0.07 of other costs. Excluding these items, comparable first quarter 2015 earnings were $0.98 per share, greater than the company's expectations. This result included a negative impact of $0.06 per share from currency translation; comparable earnings per share excluding the impact of currencies would have been $1.04 per share.

"We were pleased to report improved sales trends in the first quarter. In fact, our results exceeded our expectations and we are on-track for the year," said John Bryant, Kellogg Company's chairman and chief executive officer. "We've made great progress with Project K and are reinvesting to drive profitable sales growth."

Net sales posted by Kellogg North America were $2.4 billion in the first quarter, a reported decrease of 3.7 percent; currency-neutral comparable net sales decreased by 2.8 percent. The US Morning Foods segment posted a currency-neutral comparable net sales decline of 2.9 percent, which included improved trends in the Cereal business. Currency-neutral comparable net sales in the US Snacks segment decreased by 1.1 percent, also reflecting an improvement in sales trends. The US Specialty Channels segment posted a 2.5 percent decline in currency-neutral comparable net sales in the quarter due to a discrete item. The North America Other segment, which is now composed of the US Frozen Foods, Kashi, and Canadian businesses, posted a 6.1 percent decrease in currency-neutral comparable net sales. Reported operating profit in North America decreased by 9.9 percent; currency-neutral comparable operating profit declined by 8.0 percent, largely as the result of lower sales.

Reported net sales decreased by 13.8 percent in Europe in the quarter; currency-neutral comparable net sales increased by 1.0 percent including double-digit currency-neutral comparable net sales growth for the Pringles business. In Latin America, reported net sales increased by 6.3 percent; currency-neutral comparable net sales increased by 15.7 percent, including broad-based growth across the region. Reported net sales in Asia Pacific decreased by 5.3 percent; currency-neutral comparable net sales increased by 4.0 percent due to good rates of growth in the Asian businesses.