Kellogg Company has reported stronger than expected fourth quarter and full-year earnings and as a result raised its forecast for earnings in 2006.
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Reported net earnings for the full year 2005 were $980.4m, a 10% increase from last year. Earnings were $2.36 per diluted share, an increase of 10% from the $2.14 per share in 2004.
“In 2005, our company posted the strongest performance since we implemented our focused strategy,” said Jim Jenness, Kellogg’s chairman and chief executive officer. “This was our fourth consecutive year of greater than targeted sales growth, double-digit earnings per share growth, and improvement in return on invested capital.”
Reported net sales in 2005 increased by 6% to $10.2 billion; fourth quarter sales were approximately unchanged at $2.4 billion even though 2005 included one less shipping week.
Internal net sales growth, which excludes the effect of foreign-currency translation and differences in the number of shipping days, was 6% for the full year and 6% in the fourth quarter.
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By GlobalDataKellogg North America reported net sales growth of 7% in 2005, and 2% in the fourth quarter, also affected by last year’s extra week.
Kellogg International reported net sales growth of 4% in 2005, and a sales decrease of 4% in the fourth quarter.
As a result of the company’s strong performance in 2005, Kellogg raised its expectations for full-year 2006 earnings. The company now expects earnings per share to fall within a range of $2.43-2.48; this includes the $0.09 impact of an accounting change which requires the expensing of stock- based compensation.
“The company raised its earnings guidance despite continued expectations that, like the rest of the industry, it will face significantly higher fuel, energy, and benefit costs. The company also anticipates that it will increase its investment in brand-building programs at a rate greater than sales growth in 2006 and that it will execute additional cost-saving initiatives; Kellogg anticipates that these up-front costs will total approximately $90 million for the full year,” a statement said.
Jenness said: “The excellent results that the company has achieved over the last four years are a testament to the longevity of our strategy and operating principles and our executional capabilities. Our focus and realistic targets allow us to make the right decisions for the long-term and make significant investments in brand building and innovation, which we recognize are the drivers of industry growth. We remain very confident regarding our excellent program of new products and programs planned for next year. It is this, our current momentum, and the dedication of all our employees, that will lead to another year of excellent results in 2006.”
