A rise in second-quarter earnings that beat analyst expectations was not enough to prevent half-year profits falling at cereal giant Kellogg.
The US company today (28 July) posted net income of US$343m for the quarter to 2 July, which equated to earnings per share of $0.94.
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The consensus among analysts on Wall Street was that Kellogg’s second-quarter EPS would reach $0.91.
The result compared to net income of $302m and earnings per share of $0.80 in last year’s second quarter.
Meanwhile, Kellogg’s second-quarter operating profit climbed 12.4% to $543m.
Kellogg said it was “lapping soft comparisons” in the second quarter but insisted its performance “reflected strong innovation”. The company also said it saw the benefit of price increases, made to help offset higher input costs.
However, the increase in quarterly earnings did not prevent Kellogg from reporting a 1.5% fall in half-year net income to $709m. First-half operating income dipped 0.4% to $1.12bn.
The fall in half-year profits came despite higher quarterly and first-half net sales as Kellogg’s costs rose. In the second quarter, Kellogg’s net sales increased 10.6% to $3.39bn. For the first six months of 2011, the company reported net sales of $6.87bn, up 7.7% on the year.
President and CEO John Bryant said Kellogg had reported “solid first-half top-line results” and added: “As we look to the back half of 2011, we expect continued sales growth driven by price and mix and are confident in our innovation line up and commercial plans.”
The growth in sales prompted Kellogg to state that it now expects its internal net sales to increase by 4-5%. In May, the company said it was targeting growth of 4%.
Kellogg, however, confirmed that it still sees its internal operating profit either staying flat or falling by up 2% in 2011.
The company reaffirmed its full-year guidance for currency-neutral earnings per share, which it sees growing by the low single-digits. Assuming no foreign exchange impact, the forecast implies EPS of $3.33-3.40.
Kellogg estimates a foreign exchange benefit of approximately $0.09, which would result in reported 2011 EPS guidance of $3.42 to $3.49.
Shares in Kellogg were down 0.5% at $55.27 at 11:38 ET today.
Click here for the statement from Kellogg.
