Kellogg Co. Reports 5 Percent Net Sales Gain In First Quarter

Kellogg Co. announced that first quarter 2011 reported net sales increased 5 percent to $3.5 billion. Internal net sales, which exclude the effects of foreign currency translation, rose 3 percent over the same period. First quarter 2011 operating profit was $572 million, a decline of 10 percent on a reported basis and 12 percent on an internal basis. The decline is attributed to increased input costs and a double-digit increase in brand building as the company reinvested to drive momentum. The benefit from recent pricing actions was not fully reflected in first quarter results. In addition, the company is lapping a difficult year-over-year comparison with first quarter 2010 internal operating profit growth of 17 percent.

Reported earnings for the first quarter 2011 were $366 million, or $1.00 per diluted share, a decline of 8 percent from first quarter 2010 reported earnings of $1.09 per diluted share. On a currency-neutral basis, first quarter 2011 earnings per share declined 10 percent compared with first quarter 2010 currency-neutral earnings per share growth of 27 percent.

"We had a solid start to 2011, exceeding our internal expectations for the quarter. Our top-line growth reflects our increased emphasis on innovation, investment in brand building and net price realization. Our momentum is building, as demonstrated by strong share gains in most of our U.S. categories," said John Bryant, president and chief executive officer in a prepared statement. "We are raising our full-year 2011 internal net sales guidance to approximately 4 percent to offset higher input costs, and we are on track to meet our operating profit and currency-neutral 2011 EPS guidance. We will continue to leverage the power of our brands to achieve our goals for 2011 and remain focused on delivering sustainable growth over the long term."

During the first quarter 2011, Kellogg North America net sales increased 4 percent on a reported basis to $2.4 billion, while internal net sales increased 3 percent. On an internal basis, North America retail cereal net sales rose 2 percent driven, in part, by the strength of recently launched innovation. North America retail snacks delivered robust internal net sales growth of 5 percent. North America frozen and specialty channels first quarter internal net sales grew 4 percent as the momentum in the Eggo business continued to accelerate. First quarter 2011 North America operating profit declined 12 percent on both a reported and internal basis, due to a difficult year-over-year comparison of 22 percent growth on an internal basis for the first quarter 2010, higher cost of goods sold, and increased brand building investment.

Kellogg International posted first quarter 2011 reported net sales of $1.1 billion, growing 8 percent year-over-year. On an internal basis, excluding the effects of currency translation, net sales increased 2 percent. Compared with the same period last year, internal net sales in Europe decreased 1 percent, driven primarily by the continued difficult operating environment in the United Kingdom. Latin America internal net sales grew 10 percent, and Asia Pacific internal net sales rose 2 percent. Reported first quarter 2011 operating profit for the Kellogg International business declined 3 percent. On an internal basis, operating profit decreased 9 percent as a result of higher input costs across the businesses. In addition, the benefit from recent price increases was not fully reflected in the first quarter results.

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