Kellogg’s organic sales for Q1 bolsters its annual earnings outlook to 6% to 7%, up from previous guidance of 5% to 7%

USA – Kellogg, an American multinational snack and cereal company has announced that it has raised its organic sales to US$4.05 billion for Q1, up 10% from the US$3.67 billion attained last year according to Steven A. Cahillane, chairman, president, and chief executive officer.

As a result, Kellogg has adjusted its earnings outlook for the year in the wake of the first-quarter results which was stronger than expected.

According to Kellogg, the company expects net sales growth in a range of 6% to 7%, up from previous guidance of 5% to 7%.

Operating profit is expected to rise 8% to 10%, up 1 percentage point on both sides. Earnings per share are expected to decrease 1% to 3%, versus previous guidance down 2% to 4%.

“This improved outlook reflects the higher operating profit outlook, while still incorporating significant year-on-year pressure from the impact on pension income and interest expense of lower financial asset values and higher interest rates,” Kellogg said.

However, the company’s net income in the first quarter was $298 million, equal to 87¢ per share on the common stock, down 29% from US$422 million, or US$1.24, in the first quarter of last year.

Speaking to investment analysts, Mr. Cahillane said the company benefited in the quarter that ended April 1 from service levels improving and bottlenecks and shortages easing more quickly than had been anticipated.

We continue to grow net sales organically above our long-term targets, and this growth spans across our regions and our category groups,” he said. “We also continue to make progress toward recovering our profit margins.”

Affected by increasing prices in logistics, labor, and ingredients Kellogg has successfully raised product prices so far without being hit by consumers. However, analysts expect the company could hit a ceiling, as inflation keeps hurting American families with no clear shows no sign of cooling.

Kellogg said average selling prices were up 13.7% in the second quarter, while sales volumes dropped only 1.5%. Net sales rose to US$3.86 billion from US$3.56 billion a year earlier, while analysts expected sales of nearly US$3.64 billion, according to Refinitiv data.

Kellogg revealed that the earnings decrease versus a year ago reflected numerous unusual items, including a negative year-on-year swing in mark-to-market impacts and incremental up-front costs.

In addition, Kellogg blames the pending separation of the cereal business together with lower pension income, higher interest expense, and adverse foreign currency translation.

However, adjusted for one-time items and the currency translation, adjusted earnings per share were up 3%. Of the sales increase, price/mix contributed 15.6 percentage points while currency was a 3.3-point drag and volume was down 1.9%.

Kellogg said the company enjoyed strong net sales growth across each of its regions — Asia, Middle East, and Africa; Europe; Latin America and North America.

The company attributed the growth to “inflation-driven price realization.” By category, Kellogg’s growth drivers were global snacks, noodles in Africa, and recovering cereal sales in North America.

First-quarter operating profit in North America was US$366 million, up 8% from US$399 million a year earlier. Sales were US$2.39 billion, up 13% from US$2.11 billion a year earlier. Volume was down negligibly with essentially the entire gain accounted for by price/mix.

By category, snacks sales in North America were up 15% in the first quarter, frozen foods were up 1% and cereal was up 17%.

Further, the company revealed that it is taking a cautious view of its sales growth prospects later in the year.

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