Kellogg's sales boost offsets rising costs

By Anita Awbi

- Last updated on GMT

Related tags Cent Kellogg company Kellogg

The world's leading cereal producer Kellogg's has posted a three
per cent rise in second quarter net earnings, as strong sales in
the Americas help compensate for rising commodity costs.

Kellogg's, maker of Rice Krispies and Nutra-Grain, said yesterday earnings for the quarter ended 1 July were $266.5m (€210.2m), up from last year's $259m. Net sales increased seven per cent to $2.77bn, bolstered by sales in Latin America and the US.

Internal operating profit, which excludes the impact of foreign exchange and stock option expense, increased one per cent in the second quarter and three per cent in the year-to-date period, ahead of the company's expectations.

Kellogg's said the growth was achieved through continued investments in brand building and innovation, which worked to negate unprecedented increases in fuel, energy and commodity costs.

However analysts have started to question whether the firm will be able to continue offsetting rising fuel and commodity costs, causing Kellogg's shares to slip two per cent.

Reuters quoted JP Morgan analyst Pablo Zuanic as saying in a research report: "Top line growth was robust but we worry about slower cereal sales and tougher (comparisons) for the back half, combined with higher cost inflation."

But Kellogg's CEO Jim Jenness is confident the firm can continue to boost sales and overcome rising costs, saying"the strong results this quarter are a testament to the hard work of all the Kellogg employees around the world.

"Our confidence continues that this will be another year of sustainable, dependable growth,"​ he added.

North American net sales grew nine per cent, driven by strong demand in the cereal and snacks businesses. The snacks segment posted internal sales growth of 11 per cent due to increased demand for Pop-Tarts, Cheez-It, cookies, wholesome snacks and fruit snacks.

Kellogg International reported second quarter net sales growth of four per cent, helped by Latin America's sales growth of 10 per cent.

The European region saw internal net sales grow four per cent, driven by strong sales in the UK, Ireland, France and Italy. But the Asia Pacific region posted a net sales decline of one per cent.

The American-based firm hit sales excess of $10bn for 2005, and operates in 180 countries, with a manufacturing base in 17 locations.

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