Kellogg income soars 17% to $321 million

by Eric Schroeder
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BATTLE CREEK, MICH. — Net income in the first quarter rose 17% at The Kellogg Co., driven by innovation and effective brand building. The improved earnings led the company to raise it full-year earnings guidance to $2.70 to $2.74 per share, up from earlier estimates of $2.68 to $2.73.

Net income in the first quarter ended March 31 was $321 million, equal to 81c per share on the common stock, up from $274 million, or 69c per share, in the same period a year ago. Net sales were $2,963 million, up 9% from $2,727 million a year ago.

"Last year’s momentum continued in the first quarter of 2007," said David Mackay, chief executive officer. "Importantly, we posted these positive results while following our business model and making considerable investment in our brands, and in future growth."

Operating profit at Kellogg North America rose 3% to $361 million on a 7% gain in net sales to $2,002 million.

North America Retail Cereal posted internal sales growth of 4%, driven by brand building, recent innovation and a pricing action taken last year.

The North America Retail Snacks business performed even better, posting internal sales growth of 11% behind improved results in cookies, crackers, fruit snacks and wholesome snacks.

North America Frozen and Specialty Channels posted internal net sales growth of 5%. Kellogg said both its food-away-from home and frozen food businesses posted growth during the quarter.

At Kellogg International, net sales grew approximately 12%. The company said both its cereal and snacks businesses contributed to the results.

Operating profit at Kellogg in the first quarter rose 5% to $499 million, up from $473 million in the same period a year ago.

"The company achieved these results despite a significant increase in cost inflation and a double-digit increase in its advertising investment, which supported both new and existing brands," Kellogg said.

Looking forward, Kellogg raised its full-year earnings forecast, citing strong first-quarter performance and increased confidence regarding performance for the remainder of the year.

Kellogg said it expects full-year cash flow in a range between $950 million and $1.025 billion.

"Our first-quarter results were positive and they have increased our already high levels of confidence," Mr. Mackay said. "We continue to expect that we will post another strong year and our current momentum provides us with the opportunity to invest even more in future growth."

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