Kellogg’s Suffers as Consumers Shun Snacks & Cereals
04 Nov 2015 --- US cereals company Kellogg’s has announced that sales in its snacks business and its morning goods business fell for the third quarter. The company announced third-quarter 2015 results that were in-line with expectations.
"The company's results for the third quarter continued the momentum that we saw earlier in the year. Our developing and emerging-market businesses performed well, and the trends in our developed businesses continued to show improvement over last year," said John Bryant, Kellogg Company's chairman and chief executive officer. "Our major productivity programs continue to progress well and we remain on-track to meet our objectives for 2015 and 2016."
Third-quarter 2015 reported net sales decreased by 8.5 percent to $3.3 billion, due to the effect of currency translation. Currency-neutral comparable net sales increased by 1.0 percent in the quarter as the result of growth in Latin America, Asia, Canada, and the U.S. Specialty Channels business.
Quarterly reported operating profit was $334 million, a decline of 8.7 percent. Reported results were affected by up-front costs associated with Project K and currency translation. Currency-neutral comparable operating profit declined by 2.3 percent, primarily due to the resetting of incentive compensation closer to targeted levels; the resetting of incentive compensation lowered operating profit growth by approximately 8 percentage points.
Reported earnings for the third quarter of 2015 were $205 million, or $0.58 per share, a decrease of 6 percent from the $0.62 per share reported in the third quarter of last year. This quarter's reported earnings per share included negative impacts from the remeasurement of the Venezuelan business of $0.04 per share, mark-to-market accounting of $0.04 per share, costs associated with the Project K efficiency and effectiveness program of $0.18 per share, and$0.02 per share of integration and transaction costs. In addition, reported results included a benefit of $0.01 per share from acquisitions. Excluding all of these items, comparable third-quarter 2015 earnings were $0.85 per share. This result included a negative impact of $0.11 per share from currency translation; currency-neutral comparable earnings per share were $0.96 per share.
Kellogg North America posted reported net sales of $2.3 billion in the third quarter, a reported decrease of 2.7 percent; currency-neutral comparable net sales decreased by 1.4 percent. The U.S. Morning Foods segment posted a currency-neutral comparable net sales decline of 2.6 percent. However, Kellogg-branded cereals gained share in the 12-week, publicly-available data. Currency-neutral comparable net sales in the U.S. Snacks segment decreased by 1.5 percent, although sequential performance improved. The U.S. Specialty Channels segment posted a 6.2 percent increase in currency-neutral comparable net sales in the quarter due to growth in both the Foodservice and Convenience channels. The North America Other segment, which is composed of the U.S. Frozen Foods, Kashi, and Canadian businesses, posted a 3.4 percent decrease in currency-neutral comparable net sales. Reported operating profit in North America decreased by 7.8 percent. Currency-neutral comparable operating profit declined by 3.0 percent; this decline was primarily due to the resetting of incentive compensation. The resetting of incentive compensation lowered North American operating profit growth by approximately 8 percentage points.
Reported net sales decreased by 12.8 percent in Europe in the third quarter. Currency-neutral comparable net sales decreased by 2.1 percent. In Latin America, reported net sales decreased by 37.1 percent; currency-neutral comparable net sales increased by 23.9 percent. Reported net sales in Asia Pacific decreased by 13.2 percent; currency-neutral comparable net sales increased by 2.2 percent as the result of double-digit growth in the Asian businesses.
In addition, Kellogg Company continues to expect that, in 2016, it will achieve its long-term target for currency-neutral comparable net sales of between 1 percent and 3 percent, and its long-term target for operating profit growth of between 4 percent and 6 percent. The company still expects to meet its long-term target for currency-neutral comparable operating profit growth even if current sales-growth trends continue and 2016's currency-neutral comparable net sales growth is at the lower end of the company's long-term target range. This confidence is the result of good productivity programs, continued execution of Project K, and the anticipated implementation of zero-based budgeting. The company expects growth in currency-neutral comparable earnings per share of between 6 and 8 percent.
