Kellogg 1Q net income falls on higher costs

AP News
Posted: May 04, 2011 6:24 PM
Kellogg 1Q net income falls on higher costs

Kellogg Co.'s first-quarter net income fell 12 percent as the world's biggest cereal maker dealt with higher ingredient costs and spent more on marketing and new products.

The food maker, like much of the industry, is trying to maintain profitability as costs for ingredients and fuel soar. It has tried to pass on some of the cost increases to its customers.

Kellogg, however, said the quarter doesn't fully reflect the impact of its price increases. The company raised the low end of its full-year revenue outlook on Wednesday, saying it expects to benefit from higher prices and stronger sales.

Kellogg earned $366 million, or $1 per share, for the quarter, compared with $418 million, or $1.09 per share, a year earlier. Revenue climbed 5 percent to $3.49 billion on stronger sales around the globe.

The results missed profit forecasts but beat revenue expectations. Analysts were anticipating $1.04 per share from the food maker on revenue of $3.39 billion, according to FactSet.

The company said sales improved around the globe with new products like Eggo Thick & Fluffy Waffles in the U.S. and Be Natural cereals in Australia.

Kellogg plans to launch more than $800 million worth of new products during the year.

"Regaining momentum is our primary focus in 2011," said John Bryant, Kellogg's CEO.

Kellogg is coming off a tough year. The company struggled with soft cereal sales and major recalls that hammered its business. Bryant said the first-quarter results set the company on the right path to rebuild momentum through the remainder of the year.

The company adjusted its full-year revenue growth outlook to 4 percent; it had previously forecast 3 to 4 percent.

Kellogg still expects full-year earnings to climb in the low single-digits, implying earnings of $3.33 to $3.40 per share with no foreign exchange impact. Analysts expect $3.48 per share.

Shares of Kellogg rose early in the day but fell 68 cents to close at $56.76 Wednesday.