Kellogg: full-year sales down 7.2% but US cereal trends 'are improving'

By Vince Bamford

- Last updated on GMT

Kellogg's cereal brand line-up includes Special K and Frosted Flakes
Kellogg's cereal brand line-up includes Special K and Frosted Flakes

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Kellogg has reported a 10.6% drop in overall sales in the last quarter of 2015 to £3.1bn – but says performance of its US cereals business is improving.

The Frosted Flakes and Special K owner today (February 11) also announced full-year sales down 7.2% year on year to $13.5bn, although currency-neutral comparable net sales increased 1.2%. Currency-neutral comparable operating profit increased 2.8% in Q4, but was down 2.3% across the year to just over £2bn.

While sales in the US Morning Goods division – which includes breakfast cereals – declined 1.6% across the full year, they rose 1.5% in the last quarter as a result of stronger performance in the US cereal business, said Kellogg.

"Our results in 2015 met or exceeded our initial expectations​,” said Kellogg chairman and CEO John Bryant. “We saw good growth in many of our businesses, and importantly, trends continued to improve in the US cereal business​."

US snacks segment

The US Snacks segment posted comparable net sales down 1.9% in Q4 and down 1.6% for the full year, although Kellogg’s insisted consumption had improved in each of the categories in the segment. 

The North America Other business segment posted currency-neutral comparable net sales down 2% in Q4 and down 3.2% for the full year, driven by a decline in trade inventory when the MorningStar Farms vegetarian foods brand shifted to new packaging. The Kashi business had also impacted the results, although Kellogg said Kashi's performance had improved over the course of the year.

Beyond the US, Kellogg reported currency-neutral comparable net sales in its European business down 0.6% for the full year, though it reported a 1.6% year on year increase in the fourth quarter following “excellent growth” in the snacks business, including Pringles. 

Currency-neutral comparable net sales grew 45.3% in the fourth quarter in Latin America, largely due to the impact of currency remeasurement in the Venezuelan business; currency-neutral comparable growth for the full year was 24.6%.

The Asia Pacific business posted an increase in currency-neutral comparable net sales of 3.3% in the fourth quarter and an increase of 4% for the full year, driven by strong growth in Asian region.

Expectations reaffirmed

Kellogg reaffirmed its expectations that it will achieve its long-term target for currency-neutral comparable net sales of between 1% and 3% for 2016, and its long-term target for currency-neutral comparable operating profit growth of between 4% and 6%.

"We're very pleased with the foundation that we've built,” ​said Bryant. “We are committed to achieving our long-term goals for growth in 2016, supported by our increasing momentum and unprecedented productivity program.”

Separately, the Kellogg board has approved a $1.5bn share-repurchase program that will run through 2016 and 2017.

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