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January 31, 2007

US: Kellogg profit dips on increased costs

Kellogg has revealed that fourth quarter profits at the US’s largest cereal maker declined by 5% due to increased fuel, energy, commodity and benefit costs in the fourth quarter.

Kellogg has revealed that fourth quarter profits at the US’s largest cereal maker declined by 5% due to increased fuel, energy, commodity and benefit costs in the fourth quarter.

“We’ve faced significant cost inflation and difficult operating conditions in many of our businesses,” David Mackay, Kellogg’s chief executive officer, said during a conference call. “The volatility in commodity costs continues and will remain a challenge for the foreseeable future,” he added.

Revenue increased 8% during the fourth quarter, up from US$2.39bn to $2.50bn. However, Kellogg’s profits totalled $182.4m, or $0.45 per share, for the quarter ended 30 December, down from $192.4m, or $0.47 per share, in the comparable quarter of last year.

For the full year, net income was up 2%, increasing to $1bn, or $2.51 per share, from $980.4m, or $2.36 per share in fiscal 2005. Full year revenue increased 7%, up to $10.91bn from $10.18bn in 2005.

Despite further anticipated cost increases, Kellogg raised its 2007 outlook by a penny a share to $2.68-2.73 per share. Kellogg said it expects sales to grow by 4%.

“We faced a difficult cost environment in 2006 and still achieved another year of results that met, or even exceeded, our targets. Equally as important, though, is that we achieved these results while making significant investment in the business, and in future growth.

“We will face more inflation in 2007, but we remain confident that we have the right strategy, operating principles, and business model. It is our continued focus and strong execution, driven by the strength of our organisation, that give us confidence that we will deliver dependable rates of growth in 2007, and beyond,” Mackay commented.

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