Kellogg’s has lifted its full-year sales and profits outlook as strong growth of its global snack brands and a faster-than-expected recovery in cereals combined with higher prices in the first half to deliver a better-than-expected performance.
The US food giant said it had mitigated the negative impact on profits of high cost inflation, bottlenecks and shortages in the supply chain and the aftermath of a fire at a US factory through “productivity and revenue growth management”.
Revenues in the second quarter increased 8.7% to $3.9bn - up 12% on an organic basis - thanks to a positive price/mix and momentum in snacks, noodles and its international cereals operation. Kellogg’s said the performance was complemented by a “faster-than-expected” recovery in its North American cereal business, which had been hit by changing consumer tastes and meal occasions in recent years.
Sales in the first half rose 6%, and by 8% organically. However, operating profits slipped 17.7% to $415m despite the rise in the top line, partly driven by currency headwinds.
In Europe, Kellogg’s reported a 3% decline in sales in the second quarter as adverse foreign currency translation offset growth, but organic sales were up 8% for the period.
Kellogg’s raised its full-year forecasts to reflect the “strong” first half and confidence in its second-half plans.
The group now expected organic net sales growth of 7% to 8% thanks to the better-than-expected results, raised from 4%, while adjusted basis operating profits were forecast to be 4% to 5% on a currency-neutral basis - up from 1% to 2% previously.
It comes after Kellogg’s revealed plans in June for a radical overhaul of the group structure to split into three separate companies focusing on global snacks, North American cereal and plant-based.
CEO Steve Cahillane said the second quarter demonstrated the strength of the portfolio and the “skill and grit” of employees in managing the “unusually challenging” supply and cost environment.
“We sustained notably strong growth momentum in snacks and emerging markets, while accelerating the recovery of supply and category share in our North America cereal business, all while leveraging productivity initiatives and revenue growth management to mitigate the impact of decades-high input cost inflation,” he added.
“Our improved full-year outlook incorporates not only our better-than-expected results of the first half, but also confidence in our ability to continue to manage through the current supply and cost challenges while sustaining momentum in our world-class brands.
“And even as we prepare for one of our biggest portfolio transformations yet, the proposed separation into three independent companies, we remain laser focused on delivering on this improved outlook.”
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