Kellanova’s profits surged in the final months of last year as it gears up for a $36bn takeover by Mars.
The Pringles owner increased operating profits by 62% to $532m in the quarter ending 28 December due to productivity gains and cutting overheads, it said.
While net sales were down 1.6% to $3.1bn in the period, this was primarily due to adverse currency rates. Organic sales growth – which excludes the impact of currency – was above the company’s long-term target range with a 7% rise due to strong volume growth.
CEO Steve Cahillane said a more growth-oriented portfolio had contributed to a “standout quarterly performance”.
In Europe, organic sales fell 1% as “prolonged softness” in its categories caused volumes to fall. North America saw sales drop by 2%.
The best performance was seen in Asia Pacific, Middle East and Africa, where organic sales grew by more than a third. Kellanova invested $420m in a joint venture with packaged foods manufacturer Tolaram Africa Foods in 2018 in a bid to boost the contribution to growth from emerging markets.
“Led by our strong emerging markets presence, we sustained better-than-expected top-line growth amidst challenging industry conditions, and we improved our profit margins faster than we had anticipated,” said Cahillane.
Mars’s takeover is due to take place in the coming months after the deal was approved by Kellanova’s shareholders in November.
The all-cash offer marks the biggest deal in Mars’s history as it tries to fulfil an ambition to double snacking revenues in the next decade.
Kellanova’s share price is up almost 50% since news of the deal first emerged in August.
Due to the pending merger with Mars, Kellanova did not provide any forward-looking guidance.
In the UK, Kellanova recently announced a £75m investment in its north Wales site to turn it into Europe’s “largest cereal factory”. The factory will produce all Kellanova’s cereal for the UK – including Corn Flakes and Crunchy Nut –by the end of 2026 as the business winds down production at its Trafford Park site in Manchester.
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