Thursday, 28 July 2011 at 18:13, Reuters, New York
Price increases often dent consumer demand as consumers look for alternatives. (REUTERS)
Kellogg Co reported a higher-than-expected quarterly profit and slightly raised its full-year sales target as price increases help offset increased ingredient costs.
Kellogg, maker of Corn Flakes cereal, Keebler cookies and Pop-Tarts, said on Thursday it now expects 2011 net sales to grow between 4 and 5 per cent, versus an earlier forecast of 4 per cent. For the second half of the year, Kellogg said sales growth should be driven by higher prices.
Like most food companies, Kellogg has been raising prices on its cereals and snacks, but those increases have lagged higher prices for wheat, oil and other commodities. Price increases also often dent consumer demand as consumers look for alternatives.
The company stood by its target for low single-digit profit growth for the year, saying that implied earnings of $3.42 to $3.49 per share, including a gain of 9 cents from foreign currency exchange.
Net income was $343 million, or 94 per share, in the second quarter, compared with $302m or 79 cents per share a year earlier.
Analysts on average were expecting 91 cents per share, according to Thomson Reuters I/B/E/S.
Net sales rose to $3.39 billion from $3.06bn, topping Wall Street's estimate of $3.30bn.
The company cited new products and price increases for its performance, as well as easy comparisons with the year-earlier period, which suffered from a voluntary recall of millions of boxes of cereal due to an unusual smell.
In the key North American market, sales rose 8 per cent. Cereal sales rose 13 per cent, while sales of snacks rose 3 per cent and frozen foods rose 10 per cent.
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