Kellogg reported a loss of $41 million in its fourth quarter

3 mins read

The FINANCIAL — Kellogg Company on February 11 announced that fourth quarter 2015 reported net sales were $3.1 billion, a decrease of 10.6 percent from the fourth quarter of 2014.  

Fourth quarter currency-neutral comparable net sales increased by 4.2 percent.  Full-year 2015 reported net sales decreased by 7.2 percent to $13.5 billion.  Full-year currency-neutral comparable net sales increased by 1.2 percent.  Currency-neutral comparable net sales results include the impact of pricing in Venezuela, according to Kellogg Company.

The reported quarterly operating loss was $39 million; this included a significant mark-to-market adjustment of $393 million, which was primarily driven by the impact of asset returns on pension plans; the company’s pension plans remain almost 90 percent funded.  Currency-neutral comparable operating profit increased by 2.8 percent in the fourth quarter.  Full-year reported operating profit increased by 6.6 percent.  Full-year currency-neutral comparable operating profit decreased by 2.3 percent; this included a negative impact of 3 percent from the rebasing of incentive compensation.

The reported fourth quarter 2015 net loss was $41 million, or a loss of $0.12 per share; comparable earnings were $0.79 per share; this represented a decrease of 6.0 percent from the fourth quarter of 2014’s comparable earnings per share.  The translation of foreign currency lowered quarterly comparable earnings by $0.06 per share in the fourth quarter.  Reported full-year 2015 net earnings were $614 million, or $1.72 per share; comparable full-year earnings were $3.53 per share, a decrease of 7.3 percent from 2014’s comparable earnings per share.  The translation of foreign currency lowered comparable earnings by $0.28 per share for the full year; as a result, full-year currency-neutral comparable earnings were $3.81 per share, in-line with the prior year’s result.  

“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,” said John Bryant, Chairman and CEO.  “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.”

See also  Industrial Construction Company Ecohouse Rebrands Itself, Establishes as a Holding

North America

Kellogg North America’s reported net sales decreased by 8.0 percent in the fourth quarter and decreased by 4.3 percent for the full year.  Currency-neutral comparable net sales declined by 0.4 percent for the fourth quarter and by 1.6 percent for the full year.  The U.S. Morning Foods segment posted an increase in comparable net sales of 1.5 percent in the fourth quarter and a decrease of 1.6 percent for the full year.  The performance in the fourth quarter was the result of improving trends in the U.S. Cereal business.  U.S. Snacks posted a decline in comparable net sales of 1.9 percent in the fourth quarter and a decline of 1.6 percent for the full year.  However, consumption improved sequentially in each of the categories in the segment.  The U.S. Specialty Channels business posted an increase in comparable net sales of 1.5 percent in the fourth quarter and an increase of 0.7 percent for the full year.  The North America Other business posted a decline in currency-neutral comparable net sales of 2.0 percent in the fourth quarter and a decline of 3.2 percent for the full year.  This was driven by a decline in trade inventory due to a shift to new packaging in the MorningStar Farms business and results from the Kashi business; Kashi’s performance improved over the course of the year.

International

Currency-neutral comparable net sales growth in the Latin American business was 45.3 percent in the fourth quarter, largely due to the impact of the Venezuelan business; currency-neutral comparable growth for the full year was 24.6 percent, also largely due to the impact of the Venezuelan business.  Currency-neutral comparable net sales in our European business increased by 1.6 percent in the fourth quarter and decreased by 0.6 percent for the full year.  The good performance in the quarter resulted from excellent growth in the Snacks business, including Pringles.  The Asia Pacific business posted an increase in currency-neutral comparable net sales of 3.3 percent in the fourth quarter and an increase of 4.0 percent for the full year, driven by strong rates of growth in the Asian business.

See also  The factors likely to see Aussie stocks outperform in H2

The Chinese and West African joint ventures performed well in the fourth quarter.

Interest and Tax

Kellogg’s interest expense totaled $59 million in the fourth quarter and was $227 million for the year.  The comparable effective tax rate* was 24.7 percent for the fourth quarter and was 25.6 percent for the full year; both rates were lower than original expectations due to tax-planning initiatives and discrete items.

Cash flow

Cash flow, a non-GAAP measure defined as cash from operating activities less capital expenditures, was $1.14 billion for the full year; slightly greater than expected due to excellent management of working capital.  Kellogg repurchased $731 million of shares during the year.

Kellogg Reaffirms Previous Guidance for 2016, Provides Guidance for Cash Flow

In addition, Kellogg Company continues to expect that, in 2016, it will achieve its long-term target for currency-neutral comparable net sales of between 1 percent and 3 percent, and its long-term target for currency-neutral comparable operating profit growth of between 4 percent and 6 percent.  The company expects growth in currency-neutral comparable earnings per share of between 6 percent and 8 percent.  Guidance for operating profit excludes the impact of mark-to-market adjustments, integration costs, costs related to Project K, acquisitions, dispositions, foreign-currency translation, remeasurement of the Venezuelan business, and other items that could affect comparability.  Guidance for earnings per share excludes the impact of mark-to-market adjustments, integration costs, costs related to Project K, foreign-currency translation, remeasurement of the Venezuelan business, and other items that could affect comparability; it includes the impact of acquisitions and dispositions.  The company also announced today that it expects full-year cash flow to be approximately $1.1 billion.  Capital expenditure for the year is expected to be between four percent and five percent of sales, including the impact of the cash required by Project K and an increase in capital spending equal to approximately one percent of sales to support the growth of the Pringles business.

Separately, Kellogg Company’s Board of Directors has approved a $1.5 billion share-repurchase program that will run through 2016 and 2017.

 

Leave a Reply