Cereal giant Kellogg reports its second-quarter numbers tomorrow (30 July) and the impact of currency fluctuation looks set to weigh on operating earnings.
In April, the company booked a slight increase in quarterly profit and reaffirmed its guidance for 2009.
Net earnings rose 2% but operating profit dropped 3%, with sales down by an identical amount.
According to analysts at Stifel Nicolaus, foreign exchange is likely to again have had a negative effect in the second quarter of 2009.
The analysts have forecast a 2% fall in sales, with currency fluctuation having a negative impact of 7%.
Nevertheless, Stifel predicted underlying sales will rise by around 6% thanks largely, it said, to price hikes – although it forecasts a volume increase of 1%.
Price increases will offset rising input costs and boost gross margins, Stifel added.
Stifel, meanwhile, believes that the pressure from currency is expected to ease as Kellogg moves through 2009 and has upped its earnings per share forecast for the full year by six cents to US$3.08.
Nevertheless, it will remain interesting to hear the latest from Kellogg on its performance in its domestic cereal market. In April, CEO Dave Mackay said Kellogg’s share of the US cereal market had come under pressure in the first quarter of the year.