Kellogg's 2Q Earnings Up 16 Percent

AP ^ | July 26, 4:51 pm ET | James Prichard,

[BenLurkin]

GRAND RAPIDS, Mich. (AP) -- Kellogg Co., the world's leading cereal producer, said sales growth and the successful execution of its business strategy contributed to a 16 percent jump in second-quarter net earnings, beating Wall Street's expectations. ADVERTISEMENT

Profits increased to $237.4 million, or 57 cents per share, compared with $203.9 million, or 50 cents per share, during the same period a year ago.

The results, released Monday, were 3 cents higher than the consensus forecast of 54 cents per share by analysts surveyed by Thomson First Call.

Sales rose 6 percent to $2.39 billion in the April-June quarter, from the $2.25 billion reported during the same three months of 2003.

Kellogg's performance during the quarter, which ended June 26, exceeded expectations despite significant increases in investment for future growth, said Carlos Gutierrez, chairman and chief executive officer.

"Our sales growth remained very strong as our business momentum continued, and we also continued to make significant investments in future growth," he said in a statement. "It is particularly gratifying that we were able to achieve this excellent performance while absorbing increased commodity and benefit costs."

Net earnings for the first half of this year were $457.2 million, or $1.10 per share, compared with $367.8 million, or 90 cents per share, in 2003. Sales rose 9 percent to $4.78 billion from the $4.39 billion last year.

Shares of Kellogg rose 52 cents to close at $40.75 on Monday on the New York Stock Exchange.

Kellogg North America reported net sales growth of 5 percent, led by a 7 percent increase in sales of retail snacks. North American cereal sales increased 2 percent.

"In the U.S., we continue to increase our (cereal) share," Gutierrez said during a teleconference with financial analysts and reporters. "In fact, this is the fifth year in a row we have increased our U.S. cereal share category."

Although cookies continue to be a difficult category with too little innovation and brand-building, new products and promotional programs led to a modest increase in cookie sales during the quarter, he said.

Cracker sales also experienced some weakness with two new, notable exceptions: SpongeBob SquarePants Cheez-It and Cheez-It Twisterz crackers.

Gutierrez also said the popularity of low-carbohydrate products spawned by the Atkins and South Beach diets appears to be waning.

"While we're clearly seeing that the low-carb trend or fad has peaked -- and it looks like it is taking a bit of a dive in the supermarket -- we have yet to see the recovery of those (Kellogg) categories that were impacted by low-carb" products, he said. "I would hope to see that in the future, but we just see one-half of the equation at this point."

Battle Creek-based Kellogg also reiterated its 2004 outlook of $2.07 to $2.11 per share, which would represent growth of 8 percent to 10 percent.

"We will continue to execute our proven strategy, which should allow us to deliver dependable, sustainable growth into the future," Gutierrez said.

Kellogg, which has 25,000 employees worldwide, had 2003 sales of nearly $9 billion. Its brands include Rice Krispies, Froot Loops and Frosted Flakes cereals and Keebler cookies and crackers, Pop-Tarts toaster pastries and Eggo frozen waffles.

[FourPeas]

Definitely good news. Hopefully the economic growth we see in good quarterly earnings reports will translate into votes for President Bush.