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November 3, 2022

Kellogg raises sales, earnings forecasts after “better-than-expected” Q3

The Eggo, Pringles and Pop Tarts maker now expects annual organic net sales to increase by more than 10%.

By Andy Coyne

US cereal and snacks giant Kellogg has raised its full-year forecasts for key sales and earnings metrics on the back of a third quarter boosted by higher prices.

The Coco Pops and Pringles maker now expects its annual organic net sales to increase by more than 10%, compared with its prior forecast of an increase of 7-8%.

Kellogg also forecast adjusted full-year profit per share to rise more than 3% on a currency-neutral basis, compared with its previous estimate of more than 2% growth.

Chairman and CEO Steve Cahillane told analysts in a post-results call today (3 November) it had achieved “better-than-expected” performance as consumers accepted the pricing actions it has taken to offset input cost inflation. “Price elasticity is still low,” he said.

However, suggesting the situation could change, Cahillane said: “It’s not anything significant but UK cereal is one area where elasticity is emerging faster than anywhere else in the world.”

The Corn Flakes manufacturer – which in June announced plans to split into three, independent, public companies – said prices rose 15.7% in the third quarter, while volumes fell 2.3%.

Cahillane said Kellogg’s North American cereal business has bounced back “more quickly than expected” following a prolonged labour dispute and a fire at one of its facilities late last year.

“We had to build back inventory in Q1 and Q2. We are back to where we want to be,” he said. “We are emerging stronger from an exceptionally trying time.”

In Europe, there was a decline in Kellogg’s sales volumes following the company’s decision to no longer ship its Pringles snacks to Russia. CFO Amit Banati said the company had “found alternative uses for that volume, not just in Europe but in AMEA as well”.

Cahillane told analysts there has been no sign of cash-strapped consumers turning away from its brands and towards private-label alternatives.

“We have not seen any empirical evidence that private-label is making any meaningful inroads in any of our territories or categories,” he said.

“The concern overall is the absolute nature of household budgets.

“But it is one to watch. We are not complacent.”

Kellogg’s net sales rose 9% year-on-year to US$3.95bn in the third quarter ended 1 October but operating profit was down 17.6% at $368m. Adjusted operating profit dipped 0.2% to and stood at $449m.

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