Kellogg Co. Reports 6 Percent Decline In Third Quarter Earnings

On Oct. 21, 2010, the Kellogg Co. lowered full-year 2010 guidance. Internal net sales are expected to be down approximately one percent. Internal operating profit is anticipated to be approximately flat, which includes the benefit from lower 2010 compensation costs. Full-year currency-neutral earnings per share is expected to grow 4 to 5 percent. Given these current business results, cash flow is expected to be in the $950 million to $1 billion range. However, in the fourth quarter, we expect to make a voluntary contribution of approximately $500 million net of tax to the Company's pension and post-retirement benefit plans. Reflecting this contribution, cash flow for full-year 2010 is expected to be in the $450 million to $500 million range.

Given the challenges of 2010, Kellogg is approaching 2011 as a year of strengthening the business. For 2011, the company expects internal net sales growth to be low single-digits, in-line with long-term growth targets. Internal operating profit is expected to be flat to down 2 percent reflecting the need to reset incentive compensation levels. Earnings per share on a currency-neutral basis are expected to grow at a low single-digit rate.

CEO Mackay concluded, "2010 has been extremely difficult and our softer performance is reflected in our current 2010 outlook. We are addressing the current business challenges. As we enter 2011, we feel positive about our strong commercial plans and higher levels of innovation, yet we are also pragmatic and realistic in our 2011 forecasts. We are confident that we are doing the right things for our business and are positioning ourselves to deliver on our long-term growth targets."