Kellogg reports Q2 earnings down
integrating cookie maker Keebler Foods into its operations eroded
profits.
Kellogg Co., the second-largest American cereal maker behind General Mills Inc., on July 26, said its Q2 earnings fell 31 per cent, as the cost of integrating cookie maker Keebler Foods into its operations eroded profits. The cereal maker earned $114.6m, or 28 cents a share, compared with $165.6m, or 41 cents, assuming it had owned Keebler in both periods. Kellogg completed its purchase of Keebler in late March. Excluding the impact of Keebler integration costs of $22m, Kellogg had earnings of $128m. "Kellogg is undergoing a remarkable transformation," said chief executive Carlos Gutierrez on a conference call to discuss results. "The fact that we could turn in the earnings performance that we did in the second quarter, despite all this transformation and the disruption that goes with it, is a very good sign of things to come." Kellogg said second-quarter earnings were also impacted by unfavourable currency exchange rates and high energy costs. On a pro forma basis, sales fell 2.3 per cent from last year's second quarter, but Kellogg did not provide a dollar amount. On a reported basis, sales rose to $2.34bn from $1.80bn. US sales, boosted by Keebler's numbers, rose 55 per cent to $1.64bn. According to Kellogg's, excluding Keebler, US sales were hurt by movement of some Kellogg products into Keebler's distribution system, which lowered inventories, and stronger cereal promotions from US competitors such as General Mills and Kraft Foods Inc. Sales were also hurt by reduced snack sales from the reduction of some product lines and the postponement of some marketing support. The company's US cereal business increased its market share in dollar terms, helped by the extension of some product lines, such as its new Red Berries version of Special K. Reported sales in Europe were down 7 per cent to $345.5m. Kellogg said profitability in its international business was improving.
