Kellogg posts ‘good progress’ despite sales fall

By Matt Atherton contact

- Last updated on GMT

Kellogg reported a better than expected trading update for its second-quarter
Kellogg reported a better than expected trading update for its second-quarter

Related tags: Better, Europe

Kellogg reported better than expected results in its second-quarter trading update, driven by lower costs and higher profit margins, despite falling sales and fears of Brexit backlash.

The company claimed “good progress”​ in its second-quarter update, reporting a 0.3% rise in operating profit compared with last year, up to $507M (£385.3M). Profit improved in North America, Asia and Venezuela, but fell in Europe.

UK Pringles and wholesome snacks sales increased this quarter, but the company’s overall sales were down, due to poor performance from the UK cereal market. In Europe, the group reported a $21M (£16M) fall in sales to $629M (£478M).

Down 6.6%

The manufacturer reported company-wide revenue of $3.3bn (£2.5bn), down 6.6% year-on-year.

However, Kellogg’s cost-cutting measures still meant the company slightly improved overall profits.

Kellogg ceo John Bryant said: “We’re making good progress on our priorities. We have continued to improve our foods to ensure they are on trend.

“We’ve continued to expand the Pringles business worldwide. We’re enhancing our sales capabilities, and we are designing and executing productivity initiatives that are contributing to more profit-margin expansion than we previously anticipated.

The better than expected profit prompted the company to raise its expected earnings per share for 2016, from $4–$4.07 (£3.04–£3.09) to $4.11–$4.18 (£3.12–£3.18).

 ‘Enhanced earnings visibility’

Bryant said: “We have carefully constructed a plan to boost our profit margins higher and sooner, giving us enhanced earnings visibility.”

However, the cereal and snack manufacturer said Britain’s Brexit vote would have a big influence on currency translation, which is now expected to have a greater negative impact than anticipated.

Meanwhile, the inner-workings of Kellogg’s Manchester factory were unveiled​ on July 26, in BBC Two’s ‘Inside The Factory: How Our Favourite Foods Are Made’ ​documentary. The factory, the largest cereal factory in Europe, ran for 24 hours a day, seven days a week, and has more than 400 members of staff.

Kellogg Q2 trading update – at a glance

  • 0.3% rise in operating profit
  • UK sales down £16M
  • Expected earnings per share up to £3.12–£3.18

Related topics: Ambient foods

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