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Kellogg Company Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 9, 2011 04:17PM
Kellogg Company (K) filed Quarterly Report for the period ended 2011-10-01. Kellogg Co. has a market cap of $18.06 billion; its shares were traded at around $49.89 with a P/E ratio of 15.3 and P/S ratio of 1.5. The dividend yield of Kellogg Co. stocks is 3.4%. 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 October 1, 2011, our reported net sales increased 5% and internal net sales increased 3%. Consolidated operating profit decreased 14%, while internal operating profit decreased 16%. Diluted earnings per share (EPS) decreased 11% to $0.80, compared to $0.90 in the comparable prior year quarter. EPS on a currency-neutral basis was down 13%. Our performance was below our expectations for the quarter. While we experienced solid top-line growth, our operating profit was negatively impacted by the lapping of the significant reduction of incentive compensation costs in the third quarter of 2010 and the reinstatement of those costs in 2011 and our investments in our supply chain.
Venezuela and Colombia. Strong price realization helped offset high cost inflation and was used to fund a double-digit increase in brand-building. In Asia Pacific, internal net sales were up 2% as a result of continued strong sales in our Korea, South Africa and India businesses. Offsetting this growth was softness in Australia, Japan and China. In Australia, our sales declined compared to last year due to a recent customer issue.
Consolidated operating profit was down 14% on a reported basis, and 16% on an internal basis, driven primarily by input-cost inflation, investments in our supply chain, the adjustment we made in the third quarter of 2010 to significantly reduce incentive compensation expense and the reinstatement of those costs in 2011. The net incentive compensation adjustment decreased operating profit by 12%. Brand-building in the quarter was down compared to last year, resulting in a benefit to operating profit. While we anticipated the third quarter of 2011 would have the highest inflation of the year, we incurred more cost pressures than expected, resulting in less operating profit.
The following tables provide analysis of our net sales and operating performance for the year-to-date periods of 2011 as compared to 2010. Our net sales benefited from a slight increase in volume, improved pricing/mix due to price realization and foreign exchange. Internal operating profit was down on a year-to-date basis due to increased cost pressures, investments in our supply chain and the reinstatement of incentive compensation.
Stocks Discussed: K,