BATTLE CREEK, MICH. — With sales weak in developed markets, including all segments of the company’s North American business, third-quarter net income of Kellogg Co. was under pressure.
Kellogg net income during the three months ended Sept. 27 was $225 million, equal to 63c per share on the common stock, down 40% from $452 million, or 90c per share, in the third quarter last year. Sales were $3,639 million, down 2% from $3,716 million in the third quarter of 2013.
Operating profits during the quarter were $365 million, down 28%. Most of the decline was attributable to non-ongoing factors, including costs associated with Project K (the company’s four-year efficiency/effectiveness program). Excluding these expenses, the effects of foreign currency moves, acquisitions, dispositions, market-to-market accounting and integration costs, operating profits were down 1.8% in the quarter, nearly matching the sales decline.
“We are pleased to have announced results for quarterly operating profit and earnings per share that were ahead of our expectations,” said John Bryant, chairman and chief executive officer. “Our international business did well in the quarter, although we continued to face the challenges in developed regions and categories that we’ve seen all year. We have been working hard on our plans for 2015 and we have both good brand building activities and new product introductions planned for the first quarter, and the balance of the year. We also continue to execute the largest restructuring program in our history, which will enable us to invest back in our business and drive sustainable growth.”
Operating profit of Kellogg North America in the third quarter was down 20%, down 9% excluding special items. A drop of 4.2% in sales, to $2.3 billion, included declines of 4.7% in U.S. Morning Foods; 4.2% in U.S. Snacks; 4.1% in U.S. Specialty Channels; and 1.1% in North America Other, which includes the frozen foods business in the United States and Canadian business.
While third-quarter sales in Europe were down 0.6% from the year before, sales were up 6% in Latin America and 4.8% in the Asia Pacific region.
The company left its full-year 2014 guidance unchanged, with projected earning to range between $3.88 and $3.96 per share.In the nine months ended Sept. 27, net income was $926 million, or $2.58 per share, down 6% from $926 million, or $2.72. Sales were $11,066 million, down 1.9%.