Cereal maker Kellogg Co. (K) on Tuesday reported a loss for the fourth quarter that narrowed from last year, reflecting strong sales growth that helped offset the impact of an accounting charge. Both revenues and underlying earnings per share for the quarter beat analysts' expectations. Looking ahead, Kellogg affirmed its financial outlook for fiscal 2013.
Kellogg's reported operating profit for the quarter was $2.9 million, compared to operating loss of $237.9 million in the same period last year.
However, comparable internal operating profit, which excludes the impact of changes to the accounting for pensions and post-retirement plans, the effects of foreign currency translation, acquisitions, divestitures and integration costs declined by 7.6 percent. The decline reflects continued inflation in cost of goods sold, a double-digit increase in investment in brand building, and the timing of up-front costs.
Kellogg's fourth-quarter net loss narrowed to $32 million or $0.09 per share from $195 million or $0.54 per share in the prior-year period.
In an effort to increase the visibility into financial results, Kellogg chose to adopt a new method for accounting for pensions, though this change has no impact on cash flow. As a consequence of the change, the company recognized a year-end mark-to-market charge and removed pension-related amortization expense from results.
The latest quarter's results include mark-to-market losses of $401.3 million or $0.09 per share and the impact of changes to pension accounting of $19.2 million or $0.03 per share.
This compares to mark-to-market losses of $664.4 million or $1.25 per share and impact of changes to pension accounting of $30 million or $0.07 per share in the previous year.
Comparable earnings before accounting change for the quarter were $0.62 per share, compared to $0.64 per share in the year-ago quarter. Excluding Pringles integration costs, underlying earnings were $0.67 per share, compared to $0.64 per share in the same period last year.
On average, fourteen analysts polled by Thomson Reuters expected the company to earn $0.66 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter grew 18 percent to $3.56 billion from $3.02 billion in the same quarter last year and beat analysts' consensus estimate of $3.44 billion.
Internal net sales, which excludes the effects of foreign currency translation, acquisitions, divestitures and integration costs, increased by 5 percent from the preceding year. Kellogg North America's net sales increased 12 percent, while Kellogg International's net sales grew 31 percent.
For fiscal 2012, Kellogg's net income rose to $961 million or $2.67 per share from $866 million or $2.38 per share in the previous year.
Comparable earnings before the accounting change, but including $0.09 per share of integration costs, were $3.28 per share for the year, compared to $3.38 per share in the prior year. Excluding integration costs, underlying earnings were $3.37 per share, compared to $3.38 per share last year.
Net sales for the year grew 8 percent to $14.20 billion from $13.20 billion in the previous year. Internal net sales increased 3 percent from last year.
Analysts expected the company to earn $3.32 per share for the year on revenues of $14.08 billion.
Looking ahead to fiscal 2013, Kellogg maintained its forecast for reported earnings per share to grow between 5 and 7 percent, and reported operating profit to increase at a rate slightly faster than the rate of earnings-per-share growth. The company also affirmed its guidance for full-year reported net sales growth of about 7 percent.
Street expects the company to report earnings of $3.69 per share for the year on revenues of $15.17 billion.
In Tuesday's regular session, K is trading at $59.11, up $1.01 or 1.74 percent on a volume of 161,950 shares.
by RTT Staff Writer
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