Kellogg profit beats expectation

AAP
August 03, 2012

ESCALATING commodity costs and ongoing weakness in Europe drove Kellogg’s second-quarter net income down 12 per cent Thursday. But adjusted results topped Wall Street’s view and the food maker’s one-two punch of breakfast goods and snacks gave a lift to revenue, driven by sales of Pop-Tarts and strength in North America.

Kellogg Co. has long been known to consumers for its morning wake-up foods like Frosted Flakes cereal and Eggo waffles. But the company is aggressively building its snacks business as well, with hopes that its recent $US2.7 billion ($A2.59 billion) acquisition of Pringles from Procter & Gamble Co. will make it a global player in that market. The snacks division already includes Cheez-It, Keebler’s Club crackers and Special K crackers.

With consumers busier than ever and worried about the economy and high unemployment, on-the-go foods like Pop-Tarts and Pringles potato snacks are proving popular because they are relatively inexpensive and easily portable foods.

Kellogg plans to concentrate plenty of effort on the Pringles business. President and CEO John Bryant said in an interview with The Associated Press that while Kellogg has had success with its snacks business in the US, the Pringles buyout will take it to the next level.

“Pringles gives us the ability to grow out that global platform,” he said.

Indeed, the Pringles brand is sold in more than 140 countries and gets two-thirds of its revenue from abroad. With this new component of its business, Kellogg now has ready-made access to the snacks market overseas.

For the three months ended June 30, Kellogg reported net income of $US301 million, or 84 cents per share, down from $US343 million, or 94 cents per share, a year earlier.

The current quarter’s results included 7 cents per share in costs related to the Pringles deal and a one-time benefit of 2 cents per share tied to the buyout of the snacks maker.

Removing these items, earnings were 89 US cents per share.

Analysts expected earnings of 85 US cents per share, according to a poll by FactSet.

Revenue for the Battle Creek, Michigan, company edged up 2 per cent to $3.47 billion. That beat Wall Street’s estimate of $US3.38 billion.

Shares of Kellogg added $US1.63, or 3.4 per cent, to close at $US49.44 Thursday. Its shares are up 6.7 per cent since hitting a 52-week low of $US46.33 on July 24.