Battle Creek / MG. (kc) Kellogg Company reported second quarter 2008 earnings per share growth of nine percent with an eleven percent increase in sales. Results were driven by strong execution, innovation and price realization, and were achieved after absorbing significant cost inflation. In addition, Kellogg has raised its 2008 full-year earnings guidance to a range of 2,95 USD to 3,00 USD per diluted share, as a result of the Company´s first half performance and its confidence regarding performance for the remainder of the year.
The Company also announced that its board of directors has authorized an additional 500 million USD share repurchase program, to be executed within the next twelve months. The Company´s initial 2008 authorization of 650 million USD has already been completed. The additional repurchases are expected to commence late this year from Company cash balances. Consequently, the Company does not anticipate the purchases will have a meaningful impact on 2008 earnings per share.
Reported net earnings for the quarter were 312 million USD, a four percent increase over last year´s 301 million USD. Earnings were 0,82 USD per diluted share versus last year´s 0,75 USD; an increase of nine percent. The second quarter performance included the impact of significantly higher commodity inflation and a double-digit increase in advertising spending offset by lower upfront costs and a lower tax rate.
«Our first half performance provides further evidence of the strength of our business model and strategy», said David Mackay, Kellogg´s chief executive officer. «Despite significant inflation headwinds, we capitalized on our momentum to further increase our investment in future growth. We increased our earnings guidance and acquired two businesses in emerging markets within the first half of the year, and we continue to utilize our strong cash flow to return profits to our shareholders through dividends and share repurchases».
Reported net sales in the second quarter increased 11 percent to 3,3 billion USD. Internal net sales growth, which excludes the effect of foreign-currency translation and acquisitions, was six percent.
Kellogg North America posted reported net sales growth of seven percent; internal net sales growth was six percent, driven by broad-based growth across the region. Retail Cereal posted internal net sales growth of five percent, the Retail Snacks business posted internal net sales growth of six percent and the North America Frozen and Specialty Channels businesses reported internal net sales growth of ten percent.
Kellogg International reported second quarter net sales growth of 17 percent, or six percent excluding the favorable effect of currency translation and acquisitions. Internal net sales in Latin America increased by seven percent and European internal net sales grew by five percent. The Asia Pacific region posted internal net sales growth of nine percent.
Reported operating profit was 530 million USD in the second quarter of 2008, an increase of two percent from the second quarter of last year. Internal operating profit growth was also two percent in the second quarter. Total up-front costs incurred for cost-reduction initiatives were approximately 0,04 USD per share. Kellogg still expects that up-front costs related to cost-reduction initiatives for the full year will be approximately 0,14 USD of earnings per share.
Cash flow, defined as cash from operating activities less capital expenditures, was 510 million USD in the first half versus last year´s 569 million USD. For the full year, Kellogg still anticipates cash flow of between 1’000 million USD and 1’075 million USD (source).
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