Milling & Baking News - November 3, 2009 - 9

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Kellogg earnings up 6%; sees
double-digit growth in '09, '10
BATTLE CREEK, MICH. - Net income at The Kellogg Co. in the third
quarter ended Oct. 3 was $360 million, equal to 94c per share on the
common stock, up 6% from $341
million, or 90c per share, in the third
quarter last year. Net sales were
$3,277 million, nearly unchanged
from $3,288 million.
Kellogg said earnings growth was
12% on a currency-neutral basis in the
third quarter, and sales were up 3% excluding the effects of foreign currency
translation and acquisitions.
The company raised its earnings
guidance for 2009 to growth of 10% to
12%, on a currency neutral basis, up
from 8% to 10%. For 2010, the company projected currency-neutral earnings growth of 10% to 12%, a "second
consecutive year of growth above longterm annual targets," the company said.
"The current economic environment has placed significant pressure
on our consumers," said David Mackay, chief executive officer. "However,
the environment also provided us
with both the incentive and the opportunity to build an even stronger
company for the future. We are aggressively pursuing productivity initiatives as well as taking advantages
of media deflation and efficiency programs to invest even more back into

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Financial Results

gains were "driven by ongoing solid
performance from Cheez-It and Town
House," Mr. Mackay said. New Special K crackers performed "ahead of
expectations," he added.
The decline in cookie sales during
the quarter was in line with the overall
category, Mr. Mackay said.
"However, Fudge Shoppe posted
a strong performance, and Mother's

advertising to further drive the longterm health of our brands."
For the current year, Kellogg reaffirmed its sales currency-neutral
growth guidance of 3% to 4%, which
the company said exceeded its longterm targets. Gross
margin
expansion
'We are aggressively pursuing
for 2009 of 100 basis
points is expected, "reproductivity initiatives as well as taking
flecting strong producadvantages of media deflation and
tivity gains and slightefficiency programs to invest even more
ly lower than expected
inflation."
back into advertising to further drive the
Commenting on the
long-term health of our brands.''
outlook, Mr. Mackay
- David Mackay, chief executive officer
said the company is
of The Kellogg Co.
"pragmatic about the
challenging environment" it faces, notwithstanding the brand cookies continued to deliver
above expectations," he said. "Includguidance above long-term targets.
Kellogg North America operating ing Mother's as a new business for
profit in the third quarter was $415 us, our store door cookie share grew
million, up 9% from $380 million in slightly in the quarter."
Better performance was achieved
the same period last year. Sales were
by the Kellogg wholesome snack busi$2,187 million, up 1.4%.
In a presentation prepared for an ness with double-digit sales growth
Oct. 29 conference call with securities and more than two points of share
analysts, Kellogg third-quarter sales, gain. Mr. Mackay said the company's
excluding the effects of currency trans- Fiber Plus and Cinnabon bars are perlation, were up 2% for retail cereal, up forming ahead of expectations. Addi3% for retail snacks and down 3% for tionally, Nutri-Grain bars again were
frozen and specialty channels. In its "a solid performer," he said.
Kellogg Europe operating profit
retail snacks business, the company
enjoyed sales growth in toaster pas- was $105 million, down 7% from $113
tries, crackers and wholesome snacks million in the third quarter last year.
Sales were $631 million, down 5%.
but a decline in cookies.
Kellogg Latin America operating
Mr. Mackay said the cereal category
overall grew about 2% dur- profit was $51 million, down 16%
from $61 million. Sales were $262 miling the third quarter.
"Despite a competitive lion, down 5%.
Kellogg Asia Pacific operating profit
environment,
category
share growth in measured was $28 million, up 8% from $26 milchannels was up 20 basis lion. Sales were $197 million, up 4.2%.
"Hence, we are focused on continpoints," he said.
The company has fo- ued reinvestment into our brands as
cused principally on its top well as optimizing our business modeight brands plus Kashi, el and global organization - while
Mr. Mackay said, noting achieving cost savings and future visthat the favored brands en- ibility," he said. "We therefore remain
joyed 8% sales growth, Spe- confident in our ability to continue
cial K, Raisin Bran and Kashi delivering sustainable, dependable
each grew at a double-digit performance in the future."
Overall, Kellogg International sales
clip, he said. He noted that
the addition of three grams were up 4% on a reported basis and
of fiber per serving of Fruit 6% excluding the impact of currency
Loops and Apple Jacks was a translation and acquisitions.
In the nine months ended Oct. 3, net
change effected during the quarter.
Turning to other categories, Mr. income was $1,032 million, equal to
Mackay said Pop-Tarts sales grew $2.71 per share, up 7% from $968 milin the low single digits in the third lion, or $2.54 per share. Net sales were
quarter as did cracker sales. The latter $9,675 million, down 2%. MBN
Milling & Baking News November 3, 2009 / 9

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Milling & Baking News - November 3, 2009

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