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Kellogg Company Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 5, 2011 02:44PM
Kellogg Company (K) filed Quarterly Report for the period ended 2011-07-02. Kellogg Co. has a market cap of $19.02 billion; its shares were traded at around $52.41 with a P/E ratio of 15.6 and P/S ratio of 1.5. The dividend yield of Kellogg Co. stocks is 3%. Kellogg Co. had an annual average earning growth of 6.2% over the past 10 years. GuruFocus rated Kellogg Co. the business predictability rank of 4.5-star.
Highlight of Business Operations:
For the quarter ended July 2, 2011, our reported net sales increased 11% and internal net sales increased 6%. Consolidated operating profit increased 12%, while internal operating profit increased 8%. Diluted earnings per share (EPS) increased 19% to $0.94, compared to $0.79 in the comparable prior year quarter. EPS on a currency-neutral basis was up 13%. Our performance was in-line with our expectations for the quarter. We had strong top-line growth, driven by price execution, and invested in brand building and in our supply chain. We lapped a soft 2010 second quarter.
For the full year 2011, we expect our internal net sales to increase by approximately 4-5%. We are on track to meet our internal operating profit guidance of flat to down 2%, and our currency-neutral earnings per diluted share growth of low single-digits (1 to 3%).
Our reported consolidated net sales grew by 11%. Volumes increased slightly in the quarter and pricing/mix increased net sales by 5.4%. We lapped the soft comparisons of the second quarter of 2010 when we were negatively impacted by weakness in cereal, lower waffle sales and a recall of select packages of breakfast cereals. If we exclude the impact of the cereal recall, volume would have been down slightly, but net sales would have been up almost 5%. Overall, we are pleased with the performance as we continued to execute our plan to gain momentum in our business by price realization, innovation and brand building. Foreign exchange provided a favorable impact of almost 5%.
Internal net sales in our international operating segments increased 3%. Europes internal net sales grew by 1%, driven by positive performance in France, Italy and Russia. In the U.K., we began to see early signs of improvement in the cereal category, while snacks continued to struggle in the tough consumer and trade environment. Latin Americas internal net sales grew by 7% due to price realization and volume recovery in Brazil, as well as strength in Colombia. Net sales in Mexico were flat, where we have been negatively impacted by trade issues which we believe are behind us. In Asia Pacific, internal net sales were up 4% as a result of the strong sales in our India, South Africa and Korea businesses. In Australia, our sales were up slightly over last year in a difficult retail environment.
Consolidated operating profit increased by 12% on a reported basis, and 8% on an internal basis. The increase was driven by strong sales growth and savings from our cost savings initiatives. We lapped a soft second quarter of 2010 where internal operating profit was down 11%.
Internal operating profit in North America increased by 11% in the quarter, lapping last years decline of 16%. The increase in operating profit reflected strong net sales growth, which more than offset higher input costs and increased brand building investments. Europes internal operating profit declined by 9%, impacted by the difficult operating environment in the U.K. and input cost inflation across the region. In Latin America, internal operating profit increased by 19%, driven by strong sales growth, partially offset by a double-digit increase in brand-building investment. Latin Americas operating profit for the quarter includes a few discrete items, including a gain on the sale of a previously closed facility. Excluding these discrete items, Latin America operating profit grew approximately 10%. Asia Pacifics internal operating profit increased by 3% primarily due to price execution across the region.
Stocks Discussed: K,