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Kellogg Announces Strong Sales and Operating Profit Growth and 10 Percent Dividend Increase
Kellogg Company reported strong first quarter 2008 sales growth of 10% and operating profit growth of 9%. These results were driven by innovation, recent price increases and effective brand building and were achieved after absorbing significant cost inflation. In addition, the Company's Board of Directors announced plans to increase the quarterly dividend by 10% beginning in the third quarter. Reported net earnings for the quarter were $315 million, a 2% decrease from last year's $321 million. Earnings were $0.81 per diluted share versus last year's $0.80. First quarter 2007 results included a discrete tax benefit resulting in an effective tax rate of 24% versus this quarter's 30% rate. In addition, the Company has completed this year's $650 million share repurchase program. "Our continued focus on executing our business model paid off during the first quarter," said David Mackay, Kellogg's chief executive officer. "We posted strong results, despite the impact of higher commodity inflation as well as increased advertising and up-front investments. As a sign of our confidence, the Board of Directors announced its plans for a 10% increase in the quarterly dividend starting in the third quarter." Reported net sales in the first quarter of 2008 were $3.3 billion, an increase of 10% from the first quarter of 2007. Internal net sales growth, which excludes the effect of foreign-currency translation and acquisitions, was 5%. Kellogg North America posted reported net sales growth of 7%; internal net sales growth was 5%. Retail Cereal posted internal sales growth of 4%. The Retail Snacks business also posted internal sales growth of 4%. The North America Frozen and Specialty Channels businesses posted internal net sales growth of 10%. Kellogg International reported first quarter net sales growth of 16%, or 6% excluding the favorable effect of currency translation and acquisitions. Internal net sales in Latin America increased by 7% and Europe posted internal sales growth of 5%. Both Latin America and Europe achieved solid performance in both the cereal and snacks categories. The Asia Pacific region posted internal net sales growth of 5%. Reported operating profit was $545 million in the first quarter of 2008, an increase of 9% from the first quarter of last year. Internal operating profit growth was 6% in the first quarter. The Company achieved these results despite a significant increase in cost inflation, higher up-front costs and a mid single-digit increase in reported advertising investment. Total up-front costs incurred for cost-reduction initiatives were approximately 4 cents per share versus last year's 1 cent per share. Kellogg continues to expect that up-front costs related to cost-reduction initiatives for the full year will be approximately $0.14 of earnings per share. Cash flow, defined as cash from operating activities less capital expenditures, was $181 million in the first quarter versus last year's $289 million. For the full year, Kellogg still anticipates cash flow of between $1,000 million and $1,075 million. Kellogg Expresses Confidence and Affirms Guidance for the Full Year Kellogg expects full-year earnings to be in a range of $2.92-$2.97 per share. The Company also expects that internal sales and operating profit will increase at a mid single-digit rate for the full year. Expectations for 2008 now include incremental commodity, energy, fuel and benefits expense of approximately 80 cents per share versus the previous expectation of more than 65 cents per share. Mr. Mackay concluded, "Although we now expect commodity inflation to be even higher than previously anticipated, we remain committed to achieving another strong year in 2008. Our business momentum, recent price increases and focus on productivity give us confidence we will meet our goals." About Kellogg Company With 2007 sales of nearly $12 billion, Kellogg Company is the world's leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, and veggie foods. The Company's brands include Kellogg's®, Keebler®, Pop-Tarts®, Eggo®, Cheez-It®, Nutri-Grain®, Rice Krispies®, Morningstar Farms®, Famous Amos®, Special K®, Stretch Island®, All-Bran®, Frosted Mini-Wheats®, Club® and Kashi®. Kellogg products are manufactured in 18 countries and marketed in more than 180 countries around the world. For more information, visit Kellogg's web site at www.kelloggcompany.com. |
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