Battle Creek / MG. (kc) Kellogg Company reported strong 2007 earnings. Fourth quarter earnings were 0,44 USD per share. Annual earnings were 2,76 USD per share, representing the sixth consecutive year that the Company has met or exceeded its long-term EPS targets.
Reported net earnings for full-year 2007 were 1.103 million USD, a ten percent increase over last year´s 1.004 million USD. Earnings were 2,76 USD per diluted share, an increase of ten percent from 2,51 USD per share in 2006. Reported net earnings in the fourth quarter of 2007 were 176 million USD, or 0,44 USD per diluted share, compared to 182 million USD, or 0,45 USD per share, in the fourth quarter of 2006. This result included a double-digit increase in advertising investment, significantly higher commodity, fuel, energy, and benefit cost inflation and up-front investment charges of 0,03 USD per share versus 0,08 USD per share in 2006. For the full year, upfront investment charges were 0,18 USD per share versus 0,14 USD per share in 2006. In addition, Kellogg recently announced acquisitions relating to Bear Naked Inc.; and the Gardenburger brand in the U.S.; as well as the January 2008 acquisition of The United Bakers Group in Russia.
«Despite significant additional cost pressures in 2007, our company posted another year of strong growth», said David Mackay, chief executive officer, Kellogg Company. «And for the first time, we generated more than one billion USD of cash flow. We also continued to invest cash back into the Company´s growth through higher up-front costs, a double-digit increase in advertising and several recent acquisitions».
Reported net sales in 2007 increased by eight percent to 11,8 billion USD; fourth quarter sales were 2.794 million USD, representing eight percent growth from the fourth quarter of 2006. Internal net sales growth, which excludes the effect of foreign-currency translation and acquisitions, was five percent for the full year as well as five percent for the fourth quarter.
Kellogg North America reported net sales growth of six percent in 2007, and six percent in the fourth quarter. Internal sales growth was five percent in 2007, building on growth of eight percent in 2006. Internal sales growth in the fourth quarter of five percent also built on six percent growth in the fourth quarter of 2006. The Company once again had measured share gains in the U.S. ready-to-eat cereal category in 2007 driven by the North America Retail Cereal business posting internal sales growth of three percent for the full year after posting three percent growth in 2006. North America Retail Cereal internal sales rose by eight percent in the fourth quarter versus a decrease of two percent in the fourth quarter of 2006. North America Retail Snacks posted full-year internal sales growth of seven percent in 2007, building on eleven percent growth in 2006. In the fourth quarter, Retail Snacks´ internal sales increased by two percent versus twelve percent growth posted in the fourth quarter of 2006. Fourth quarter snacks sales were adversely affected by the transition of Kashi Snacks and Kellogg´s Fruit Snacks from warehouse to the DSD distribution system. The Frozen and Specialty Channels businesses posted internal growth of six percent for the full year and six percent for the fourth quarter. The Frozen foods business posted high single-digit sales growth in 2007 and the Specialty Channels businesses posted mid single-digit internal sales growth for the full year.
Kellogg International reported net sales growth of twelve percent in 2007 and twelve percent in the fourth quarter. Internal sales growth was five percent for the full year, building on five percent growth in 2006. Internal sales growth in the fourth quarter was four percent, building on growth of six percent in the fourth quarter of 2006. The Latin American business posted internal sales growth of nine percent in 2007, lapping nine percent growth in 2006. Internal growth in the fourth quarter was six percent, building on seven percent growth in the fourth quarter of 2006. Full-year growth was driven by mid single-digit sales growth in the Mexican market and double-digit internal sales growth in various other parts of the region. Internal net sales growth in our European business increased at a five percent rate for the full year. Europe posted four percent internal sales growth in the fourth quarter as the result of continued innovation and excellent brand-building programs. In the U.K., the region´s largest business, full-year cereal sales rose at a mid single-digit rate and snacks sales increased at a high single-digit rate. The Asia Pacific business posted slightly lower internal sales, decreasing less than one percent for the full year. Internal sales growth was up two percent in the fourth quarter, due to strong performances in Japan, South Korea, India and South Africa, offset by continued weakness in Australia.
Gross margin for full-year 2007 was 44 percent, approximately 30 basis points lower than in 2006. Incremental increases in fuel, energy, commodity, and benefit costs adversely impacted earnings by 0,32 USD per share. Gross margin in the fourth quarter was 42,8 percent, down 50 basis points from the fourth quarter of 2006. Operating profit for the full year was 1,9 billion USD, an increase of six percent from 2006. Operating profit rose four percent in the fourth quarter to 359 million USD, versus 345 million USD in the fourth quarter of 2006. Internal operating profit, which excludes the effect of foreign-currency translation, increased by three percent for the full year and two percent in the fourth quarter. The Company achieved operating profit growth for the full year despite significant cost inflation and higher investment in up-front costs. In addition, the Company increased advertising investments to more than one billion USD for the first time.
In 2007, cash flow, defined as cash from operating activities less capital expenditures, was 1.031 million USD. Kellogg Company repurchased 650 million USD of its stock in 2007 and repurchased almost two billion USD over the course of the last three years.
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