Cereal giant in good shape

Related tags Cent Kellogg company

The world's biggest breakfast cereal producer, Kellogg, has
reported better-than-expected results in the second quarter, driven
by innovation and consumer promotions.

Second quarter growth at breakfast cereal manufacturer Kellogg was driven in particular by a strong performance in the UK, where new product launches in both cereals and snacks helped increase the company's market share.

Sales for the second quarter of the year were $2.24 billion, up 5.8 per cent on the same period the previous year, while for the first half as a whole, sales increased by 4.96 per cent to $4.4 billion. Positive currency exchanges accounted for 31. per cent of sales growth in the quarter, without which sales rose by 3.5 per cent.

Operating profit rose by 11.1 per cent to $414.1 million during the quarter (and by 8.8 per cent in the half to $761.5 million, while pre-tax profits rose by an impressive 14.7 per cent in the quarter to $318.5 million. For the first half, pre-tax profits were $574.6 million, up 10.3 per cent.

While the UK contributed in particular to sales growth, the company said that revenues were boosted by solid performances across the business.

Sales for Kellogg USA increased by 1.2 per cent to $1.4 billion, with US cereal sales up 3 per cent during the quarter, building on the excellent 6 per cent gain in Q2 2002, and driven by new products and strong consumer promotions.

Despite continued softness in biscuit sales, the elimination of numerous products and the loss of one major third-party customer, the US snacks division recorded a 1 per cent gain in the quarter, excluding the impact of two minor divestments since the previous second quarter. The growth came mainly as a result of the launch of several innovative new products and consumer promotions, and Kellogg gained market share in the wholesome snacks and crackers sector during the period.

Collectively, all other US businesses posted a 3 per cent increase in sales during the quarter, with increases in every sector: food away from home, Eggo frozen waffles, Morningstar Farms veggie foods and Pop-Tarts toaster pastries.

Kellogg International saw sales rise by nearly 15 per cent during the quarter, although in local currency terms the increase was a more modest 5 per cent. The improvements came as a result of Kellogg's new Volume to Value strategy and its focus on new products.

In Europe, the company recorded currency-adjusted sales growth of more than 4 per cent to $462.9 million as innovation and brand-building continued to lift sales in key markets. Kellogg's Latin American business grew almost 9 per cent in local currencies, led by Mexico's strong growth in cereal and in snacks, although they fell from $169 million to $166 million as a result of the weak currencies there.

All other segments of Kellogg International collectively posted local-currency sales growth of about 5 per cent, driven by cereal and snacks growth in Canada and Australia.

Carlos Gutierrez, Kellogg's chairman and chief executive officer, said that both the quarter and the half had been marked by increasing profitability and substantial reinvestment in brand-building and productivity, leaving the company in a strong position to develop further in the second half.

"Our sales growth was again solid, and all of our major businesses are contributing to this momentum,"​ he said. "Volume to Value is working. Our line-up of new products, advertising and consumer promotions is stronger than ever, and we continue to improve our execution. This should allow us to continue to grow cereal and expand snacks, and we are already looking to other growth opportunities in categories or segments that are close to ours and that can leverage our strong brands.

"Several such launches are slated for the second half, including Krave energy snack bars, Eggo syrups and toaster sticks, and Nutri-Grain granola bars."

With 2002 sales of $8.3 billion, Kellogg​ is the world's leading producer of cereal and a leading manufacturer of convenience foods such as cereal bars, frozen waffles, toaster pastries, cookies and crackers. It has manufacturing facilities in 18 countries and its products - including brands such as Kellogg, Keebler and Nutri-Grain - are sold in more than 180 countries.

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