By Yi Gu
Kellogg Co., getting a lift from market-share gains at its domestic cereal operation, released better-than-expected fourth quarter operating earnings Thursday.
In the fourth quarter ended Jan. 2, the food manufacturing company reported a $41 million loss, or 12 cents a diluted share loss, 86 percent less than the $293 million, or 82 cents per share loss in the year-ago quarter.
Sales at the Battle Creek, Mich. Company decreased 10.6 percent to $3.14 billion from $3.51 billion in the year-ago quarter.
Excluding unusual items, the company said, it had adjusted per-share earnings of 79 cents, down modestly from 84 cents in the year-ago quarter. The per-share results were four pennies more than the 75 cents Yahoo Finance analysts expected.
In New York Stock Exchange trading Thursday, However, Kellogg shares closed up $2.83, or 4 percent at $73.69.
“Our results in 2015 met or exceeded our initial expectations. We saw good growth in many of our businesses, and importantly, trends continued to improve in the U.S. cereal business,” John Bryant, Kellogg’s chairman and Chief Executive Officer, said in a press release.
“We’re very pleased with the foundation that we’ve built. We are committed to achieving our long-term goals for growth in 2016, supported by our increasing momentum and unprecedented productivity programs,” Bryant noted.
At Kellogg’s U.S. cereal operation, “We gained share,” he said, “We ended the year with fourth quarter consumption growth of more than two percent for the Kellogg brand and a share gain of 70 basis points, and results in December were even better.”
“We expect earnings per share growth of six percent to eight percent,” the CEO said.
Ronald Dissinger, Senior Vice President and Chief Financial Officer for Kellogg, mentioned the negative impact of Venezuela’s recent currency devaluation during the conference call.
He said foreign exchange turbulence could shave 10 cents off earnings per share in 2016; that will include four cents attributable to the impact of Venezuela exchange rates during the first half of the year, he said.
“We could see sales growth exceed the one percent to three percent range as a result of pricing actions we take in Venezuela to offset inflation and make sure that our business stays profitable,” he added.
In an online commentary, Morningstar analyst Erin Lash said “Consumer trends will continue to evolve in this competitive landscape both at home and abroad, and the onus will be on Kellogg to ensure its products consistently win with consumers.”
According to analysts, snacks sales are a weak area for Kellogg, and Bryant admitted Thursday that the segment has had a disappointing couple of years in the U.S.
For the year ended on Jan. 2, 2016, Kellogg’s net income dropped to $614 million, or $1.74 a diluted share, from $633 million, or $1.76 per share in the previous year. Sales decreased 7 percent to $14.58 billion from $13.53 billion.
