Top story

Kellogg’s has scrapped plans to spin off or sell its plant-based division MorningStar Farms amid a plunge in the valuation of competitors in the sector.

The cereals giant proposed splitting out the division, which represents around 2% of net sales, last summer to plan to focus on core categories.

However, at its annual results yesterday it announced it would now keep MorningStar Farms as part of its global snacking division as valuations of plant-based companies have collapsed since the initial spin-off was mooted.

CEO Steven Cahillane told analysts yesterday: “Given current market conditions as well as our confidence in this business as a long-term growth vehicle, we have decided to retain it as part of the global snacking company.

“When we began this process, valuation for peer companies were stratospheric compared to where they are today.” However that environment has “clearly changed,” and those have since “come down quite substantially”.

“We see an imminent shakeout coming. It’s happening already. And there’ll be a couple of players left standing,” he said.

The backtrack came as Kellogg’s announced fourth quarter results that beat market expectations for sales and earnings in spite of a challenging operating environment that featured high cost inflation and worldwide supply disruptions.

Kellogg’s fourth quarter net sales increased by 12% year on year as positive price/mix in all four regions, sustained momentum in snacks and emerging markets, and lapping the year-ago fire and strike in North America Cereal.

On an organic basis, which excludes the impact of currency, net sales increased by 16% year on year.

Full-year 2022 reported net sales increased by 8% year on year, driven by double-digit price/mix in all four regions that more than offset a modest decline in volume and adverse foreign currency translation.

Fourth quarter 2022 reported operating profit increased by 2% versus the prior-year quarter, driven by the strong, pricing-led net sales growth.

On an adjusted basis, operating profit increased by 4%, and by 7% excluding currency, despite worldwide supply disruptions and input cost inflation that persisted throughout the year.

However, full-year 2022 reported operating profit decreased by 7% year on year, due to the impact of asset valuations, up-front charges related to the company’s pending separation, and adverse currency translation.

Cahillane said: “Reflecting on 2022, I could not be more proud of our organisation’s focus and determination to work through challenges and deliver on our financial commitments.

“Facing significant cost inflation, worldwide bottlenecks and shortages, and a significant inventory rebuild in North America cereal following last year’s fire and strike, the team executed with grit and agility to deliver another year of better-than-expected results, while at the same time making progress toward our planned transformation.

“We enter 2023 in solid financial condition with strong momentum around the world. And we remain as convinced as ever that the pending separation of our company will create value for all stakeholders.”

Morning update

On the markets this morning, the FTSE 100 has edged back 0.2% from record highs to 7,897.8pts.

Risers include Naked Wines, up 3.2% to 129.7p, PayPoint, up 1.1% to 498.8p and British American Tobacco, up 0.9% to 3,045.8p.

Fallers include Just Eat Takeaway.com, down 2.7% to 1,995.4p, Bakkavor, down 2.5% to 118p and Ocado, down 2.2% to 700p. 

Yesterday in the City

The FTSE 100 closed at a record high of 7,911.1pts yesterday after rising a further 0.3% as it closes in on 8,000pts.

Unilever closed yesterday up Unilever 0.2% to 4,109p after posting strong organic fourth quarter growth driven by pricing.

British American Tobacco ended the day down 2.4% to 3,018p after posting its annual results.

Other fallers included McBride, down 4.8% to 23p, THG, down 3.6% to 57.1p, Cranswick, down 1.8% to 3,130p, Compass Group, down 1.7% to 1,856p and Hilton Food Group, down 1.6% to 678p.

Grocery risers included Bakkavor, up 3.4% to 121p, Naked Wines, up 2.3% to 125.7p, PZ Cussons, up 1.6% to 198p, Nichols, up 1% to 1,020p, Ocado, up 0.8% to 716p and Coca-Cola Europacific Partners, up 0.8% to €51.80.

Topics