BATTLE CREEK, MICH. — Fueled principally by sturdy leads to non-US markets, Kellogg Co. loved strong progress in first-quarter gross sales and earnings and raised its steering for the 2021 fiscal yr.
Web earnings at Kellogg within the first quarter was $368 million, equal to $1.07 per share on the widespread inventory, up 6% from $347 million, or $1.01 per share, within the first quarter of fiscal 2020. Web gross sales had been $3.58 billion, up 5% from $3.41 billion the yr earlier than.
“Amidst continued troublesome circumstances, our group executed exceptionally effectively within the first quarter and delivered excellent outcomes, each financially and in-market,” mentioned Steven A. Cahillane, chairman and chief govt officer. “The quarter featured continued momentum in main manufacturers and classes, accelerated progress in rising markets, and efficient administration of value pressures via productiveness and income progress administration. This sturdy begin to the yr allows us to lift our full-year monetary outlook, and underscores confidence in our potential to maintain balanced monetary supply.”
The outcomes elicited a robust response on Wall Avenue. In buying and selling on the New York Inventory Change Might 6 after the outcomes had been introduced, shares of Kellogg closed at $67.53, up $4.46, or 7%, and reached an intra-day excessive of $68.50.
With the primary quarter below its belt, Kellogg is projecting flat web gross sales for the total yr, an enchancment from a decline of 1% the corporate had been forecasting. Working revenue is anticipated to fall 1% to 2% in 2021, versus earlier steering of a 2% drop for the yr. Adjusted earnings per share for the yr are anticipated to rise 1% to 2%, an enchancment from earlier steering of 1%. With the changes, Kellogg mentioned its 2-year compound annual progress fee can be 3% for gross sales, 4% for working revenue and 5% for earnings per share, excluding the consequences of divested companies.
In North America, first-quarter working revenue was $379 million, up 3.6% from $366 million within the first quarter final yr. Gross sales had been $2.13 billion, up 1.6% from $2.1 billion. The upper working earnings had been attributed to larger web gross sales, which the corporate mentioned elevated its working leverage. By product line, snack gross sales had been up 3.8%, cereal was down 1.9%, and frozen meals had been up 0.6%.
Provide constraints had been in charge for the sluggish gross sales of ready-to-eat cereal within the first quarter, Mr. Cahillane mentioned.
“We will probably be caught up on provide and capability round midyear, as we’ve talked about beforehand,” he mentioned. “However within the first quarter, these supply-constrained manufacturers, Frosted Flakes and Froot Loops, two of the stronger manufacturers within the class, accounted for all and extra of our share lower. Excluding them, our consumption saved tempo with the class. So our underlying enterprise stays in fine condition.”
In truth, he described sturdy innovation within the first quarter with new merchandise “displaying very sturdy velocities already.” New merchandise he cited included Mini-Wheats Cinnamon Roll, Little Debbie Oatmeal Creme Pie, Particular Okay Blueberries and keto-friendly Kashi Go.
A profitable model for a few years, Cheez-It gross sales remained sturdy within the first quarter, Mr. Cahillane mentioned. He mentioned Kellogg is now searching for to translate this power into worldwide markets.
Its US consumption and share progress has been distinctive during the last a number of years, and it has continued within the first quarter,” he mentioned. “The bottom product line continues to carry out effectively, helped by efficient promoting and sports-related activations in addition to new flavors and a reformulation of the Grooves sub line. In the meantime, the Snap’d sub line is offering incremental progress sufficient that we had so as to add capability in 2020 in solely its second yr since launch.”
He mentioned Cheez-It was launched in Canada in 2020 and loved fast progress there within the first quarter of 2021. This yr, Cheez-It was launched in Brazil. It has grown right into a $1 billion world model.
North America accounted for 59% of Kellogg total gross sales within the first quarter and 80% of the corporate’s working earnings, however each gross sales and working earnings grew extra rapidly in Kellogg’s different areas within the first quarter. Gross sales had been up 10% in Europe, 4.2% in Latin America and 14% in Asia Pacific, the Center East and Africa (AMEA). US quantity was down 1.9% throughout the first quarter, versus a 0.2% improve in Europe, 4.6% in Latin America and down 1.7% in AMEA. Pricing and blend contributed 3% to gross sales progress in North America, 2.7% in Europe, 5.5% in Latin America and 16.2% in AMEA.
Mr. Cahillane attributed power in AMEA to a surge in gross sales in west Africa, the place the corporate benefited from a 20% leap in gross sales by the corporate’s Multipro distributor enterprise. Its gross sales had been up greater than 20% from the primary quarter of 2020, when the corporate additionally achieved sturdy double-digit progress. Moreover, gross sales of Pringles, ready-to-eat cereal and noodles had been sturdy throughout the complete AMEA area.
Mr. Cahillane struck a hopeful tone discussing prospects for Incogmeato, the corporate’s new line of plant-based meat analogs. He referred to as the product “nice meals” with “quite a lot of promise.” He emphasised the muse of power Kellogg has within the plant-based meals house.
“Merely put, MorningStar Farms is the most important model with the best penetration, the broadest portfolio and essentially the most events on this plant-based class,” he mentioned. “So we’re realizing good underlying momentum throughout our main class teams and led by world-class manufacturers.”
Requested about whether or not Kellogg would be capable to go alongside value will increase via larger costs, Mr. Cahillane mentioned such pricing motion just isn’t a given within the market.
“We’ve got to earn that value within the market, via investing in our manufacturers, via innovating, via placing the varieties of performances that we have been in a position to put towards our manufacturers, which places us in an excellent place to have the boldness to barely increase our steering even regardless of elevated value pressures which can be fairly actual,” he mentioned.
Amit Banati, chief monetary officer, mentioned the corporate expects enter inflation “within the excessive finish of the mid-single digits.
“We’re seeing it throughout our value basket from exchange-traded commodities to diesel and power, ocean freight,” he mentioned. “We have seen a
spike in ocean freight as effectively. I believe all of that has been integrated into the steering that we supplied at the moment. From a hedging perspective, we’re about 76% hedged on the exchange-traded commodities.”