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Kellogg's Profit And Sales Beat Estimates On Strong Snacks Demand

Kellogg Co beat Wall Street expectations for quarterly sales and profit on Thursday, driven by higher demand for its snacks, including Pringles and Pop-Tarts, in North America.

Net sales from North America, which accounts for nearly two-thirds of Kellogg's revenue, rose 1% in the second quarter ended 29 June.

The North America unit has not grown sales by this much since the first quarter of 2013, according to J.P.Morgan analyst Ken Goldman.

The maker of Eggo Waffles has been spending more on advertising and to develop on-the-go breakfast bars and more single-serve products to suit changing consumer preferences and stem falling cereal sales.

Solid Progress

Commenting on the performance, Kellogg Company’s chairman and chief executive officer, Steve Cahillane, said, "This was another quarter in which we progressed solidly against our strategy and our 2019 plan, providing further, tangible evidence that Deploy for Growth is working.

"We delivered another quarter of net sales growth, featuring more and better innovation, momentum on revitalised snacks brands, better price realisation, and continued expansion in emerging markets," he added.

Quarterly Performance

Overall organic net sales, which excluded acquisitions, dispositions and foreign exchange impact, rose 2.3%.

Total net sales rose 3% to $3.46 billion (€3.13 billion) and beat the average analyst estimate of $3.41 billion (€3.08 billion), according to IBES data from Refinitiv data.

Net income attributable to the company tumbled 52% to $286 million (€258.73 million) due to restructuring and divestment costs and a lower tax rate in the prior-year period. 

Kellogg sold Keebler biscuits and a handful of other brands for $1.3 billion (€1.18 billion), and announced plans in May and June to revamp its European and North American operations.

Second-quarter earnings were also hurt by higher input costs and a strong dollar, Kellogg said. Consumer goods companies have struggled for over two years with a surge in commodities and transportation expenses.

Excluding items, the company earned 99 cents per share, beating expectations of 92 cents.

Outlook

The company reaffirmed its full-year earnings guidance and projected a year-on-year net sales growth of 1-2% on both currency-neutral and organic basis.

Cahillane said, "We took further steps to realign our business and restructure our organisation for greater agility and cost-efficiency. And we enter the second half with increased confidence that we will finish the year on our guidance."

News by Reuters, additional reporting by Dayeeta Das. Click subscribe to sign up to ESM: European Supermarket Magazine.

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