Kellogg gets a boost from Pringles in 3Q

AAP
November 02, 2012

KELLOGG Co’s net income edged up in the third quarter, as the breakfast giant benefited from its acquisition of Pringles chips.

The Battle Creek, Michigan-based company – best known for its Frosted Flakes and Pop-Tarts – bought the brand earlier this year in hopes of becoming a global player in the salty snacks market.

The deal instantly made Kellogg the world’s second biggest salty snack food company, behind PepsiCo Inc’s Frito-Lay.

Since Pringles gets two-thirds of its revenue from overseas, Kellogg is also hoping the deal gives it inroads into the international markets, where the ranks of people with more disposable income are growing.

“While it’s early, we remain optimistic regarding the potential of this iconic brand,” CEO John Bryant said on Thursday.

During the third quarter, Kellogg said a stronger-than-expected performance by Pringles offset costs it incurred related to a Mini Wheats recall last month. The cereal recall, combined with rising costs for ingredients and increased spending on brand building, reduced the company’s core operating profit by five per cent. The measure excludes results from Pringles.

For the period ended September 29, Kellogg says it earned $US296 million ($A287 million), or 82 cents per share, in the quarter. That compares with $US290 million, or 80 cents per share, a year ago.

The company said integration costs hurt its results by four cents per share, and the recall reduced results by six cents per share. Not including such items, analysts on average expected a profit of 81 cents per share, according to FactSet.

Total revenue rose 12 per cent to $US3.72 billion, above the $US3.7 billion analysts expected.

Not including the impact of the Pringles acquisition and other items, Kellogg said its key North American unit grew sales by nearly four per cent. Its breakfast foods and Kashi unit posted sales growth of five per cent.

International sales rose 15 per cent to $US1.3 billion, but sales of core brands rose just one per cent. The struggling European unit saw a decline of 2.5 per cent, but the company noted that was an improvement from the previous quarter.

Kellogg stood by its guidance for the year, with earnings expected to range between $US3.18 and $US3.30 per share. But it said operating profit will fall between four and six per cent as a result of the Mini Wheats recall. Kellogg recalled the cereal because of the possible presence of a flexible metal mesh from a faulty manufacturing part.