BATTLE CREEK, Mich., May 5, 2016 /PRNewswire/ -- Kellogg Company announced first-quarter 2016 results. Currency-neutral comparable operating profit and earnings per share growth exceeded the company's expectations. The company continued to make progress on its priorities, and trends continued to improve across the businesses, notably in U.S. Cereal category share. Guidance for full-year currency-neutral comparable net sales, operating profit, and earnings per share was increased to reflect the better-than-expected performance of the Venezuelan business. This performance is in addition to the momentum in many other businesses that the company expects will build across the remainder of the year. In addition, Kellogg's initiatives designed to improve profitability continue to provide visibility and confidence in profit and earnings.
"We have made good progress on our priorities: We have continued to improve our food; we've continued to expand the Pringles business; we've enhanced our sales capabilities; productivity initiatives continue to provide earnings visibility; and continue to feel momentum building," said John Bryant, Kellogg Company's chairman and chief executive officer. "The actions we are taking are having an impact and we remain confident that they will drive continued improvement as this year progresses, and into 2017."
First-quarter 2016 reported net sales decreased by 4.5 percent to $3.4 billion. This primarily was due to the effect of currency translation resulting from the remeasurement of the Venezuelan business in mid 2015. Quarterly currency-neutral comparable net sales increased by 6.6 percent as the result of inflation-related sales growth in Venezuela; currency-neutral comparable net sales excluding the impact of Venezuela decreased by one percent. Quarterly reported operating profit was$438 million, an increase of 14 percent. Reported results were affected by mark-to-market accounting for pensions, year-over-year changes in up-front costs associated with efficiency and effectiveness programs, the remeasurement of the Venezuelan business, and integration costs. Currency-neutral comparable operating profit increased by 34.9 percent, mostly due to the timing of pricing actions intended to address the impact of inflation in Venezuela; currency-neutral comparable operating profit excluding the impact of Venezuela increased by 1.7 percent.
Reported earnings for the first quarter of 2016 were $175 million, or $0.49 per share, a decrease of 23 percent from the $0.64per share reported in the first quarter of last year. This quarter's reported earnings per share included negative impacts from mark-to-market accounting, up-front costs associated with efficiency and effectiveness initiatives, the remeasurement of the Venezuelan business, and interest costs from a bond tender. Excluding these items, comparable first-quarter 2016 earnings were $0.97 per share. This result included a negative impact of $0.36 per share from currency translation, $0.34 per share of which was due to the impact of the Venezuelan business. Currency-neutral comparable earnings were $1.33 per share and were $0.98 per share excluding the impact of Venezuela. The base business in Venezuela contributed $0.01 per share to earnings.
North America
Kellogg North America posted reported net sales of $2.4 billion in the first quarter, a reported decrease of 1.5 percent; currency-neutral comparable net sales decreased by 1.2 percent. The U.S. Morning Foods segment posted a currency-neutral comparable net sales decline of 1.2 percent. However, Kellogg-branded cereals gained 20 basis points of share in the 13-week, publicly-available data. Currency-neutral comparable net sales in the U.S. Snacks segment decreased by 2.6 percent, partially due to transitions in the sales force; key brands including Cheez-It and Pringles posted good rates of growth. TheU.S. Specialty Channels segment posted a 4.1 percent increase in currency-neutral comparable net sales in the quarter due to growth in all the key channels including both Foodservice and Convenience. The North America Other segment, which is composed of the U.S. Frozen Foods, Kashi, and Canadian businesses, posted a 2.7 percent decrease in currency-neutral comparable net sales due to the expected effects from shelf resets driven by a packaging initiative in the U.S. Frozen Foods business and a sales decline in the Kashi business. However, results for the Kashi business improved and we expect continued progress over the remainder of the year. Reported operating profit in North America increased by 5.2 percent. Currency-neutral comparable operating profit increased by 8.4 percent, primarily due to cost-savings from the Project K and zero-based budgeting initiatives. Full report.
