Kellogg reports 2.5% rise in Q3 net earnings

US-based food company Kellogg has reported that its net earnings for the third quarter of 2012 increased 2.5% to $296m or $0.82 per share, compared to $290m or $0.80 per share in 2011, due to the strong performance of its recently-acquired Pringles chips business.

In May 2012, Kellogg completed the acquisition of potato and wheat-based snacks brand Pringles from Procter & Gamble (P&G) for $2.69bn.

Net sales for the quarter rose 12.3% to $3.7bn, compared to $3.31bn in 2011.

Organic sales, which exclude the effects of acquisitions, divestitures and currency translation, increased 2.8%, driven by pricing actions and increase in sales volume.

Operating profit for the quarter increased 3.2% to $479m, which was affected by higher commodity costs, brand-building investments, and a recall of its cereal product.

Kellogg initiated a recall of 2.8 million boxes of Mini-Wheats cereal last month due to possible presence of metal mesh fragments, which cost the company about $0.06 per share.

Kellogg president and chief executive officer John Bryant said the company’s performance, which saw strong revenue growth in several businesses, is in line with its expectations.

"We’re also pleased that the Pringles business performed better during the quarter than we had expected," Bryant added.

Kellogg North America’s net sales increased by 11.1% to $2.46bn, helped by strong performance across all its segments – US Morning Foods & Kashi, US Snacks, US Specialty, and North America Other – while operating profit increased by 6.8% to $381m.

Kellogg International net sales rose 14.8% to $1.25bn, driven by sales growth in Latin America, UK and Asia Pacific, but this was offset by sales decline in Europe.

Its operating profit decreased 2.7% due to weak results in Europe and an increase in brand-building investments in both Asia Pacific and Latin America.

For the nine months ended 29 September 2012, net sales increased 4.42% to $10.63bn, and operating profit declined 5% to $1.49bn.

For the full year, Kellogg stood by its outlook of earnings per share of $3.18 to $3.30, but noted that its operating profit is likely to decline between 4% and 6% due to the Mini-Wheats recall.