US: Kellogg Raises FY Forecast After Strong Q2

Kellogg has raised its profit forecast for the 2016 fiscal year, after revealing that it had realised better-than-expected savings from its recent cost control programme. The update came even as it reported strong growth for its fiscal second quarter.

For the three months to 2 July, Kellogg said its cost of sales fell 11.5% to $2bn, while its selling, general and administrative expenses declined by 1% to $821m.  This helped net profit jump up by more than 25% to $280m.

The group said it will now expand zero-based budgeting to its operations outside North America, even as it said it now expects adjusted earnings of 4.11-$4.18 per share for the full year, compared to its previous forecast of $4.00-$4.07 per share.

However, the group’s sales remained weak and they fell by 6.6% to $3.27bn, the sixth straight quarter they have fallen.  The group’s US Morning Foods business recorded a 2% decline, while its US Snacks business reported a 3.8% drop.

Kellogg now expects full-year sales to stay flat or grow slightly on an adjusted basis, compared to its earlier forecast of growth of up to 2%.