Battle Creek / MG. (kc) Kellogg Company announced that fourth quarter reported net sales increased to 3,0 billion USD or by 5,4 percent from the fourth quarter of 2010. Internal net sales, which exclude the effects of foreign currency translation, increased by 6,0 percent over the same period. Fourth-quarter 2011 operating profit was 397 million USD, a reported increase of 20,3 percent; internal operating profit increased by 20,5 percent.
Full-year 2011 reported net sales increased to 13,2 billion USD or by 6,5 percent from the 12,4 billion USD posted in 2010. Internal net sales increased by 4,5 percent over the same period. Reported full-year 2011 operating profit was 2,0 billion USD, a decline of 0,7 percent; internal operating profit, which excludes the effects of foreign currency translation, declined by 2,9 percent. This anticipated decline was the result of the company´s supply-chain initiatives, the reinstatement of incentive compensation costs and continued high-levels of commodity inflation.
Full-year reported net earnings were 1,2 billion USD or 3,38 USD per diluted share, an increase of 2,4 percent from full-year 2010 earnings of 3,30 USD per share. Full-year, currency-neutral 2011 earnings per share were unchanged from the previous year. Fourth quarter reported net earnings were 232 million USD or 0,64 USD per diluted share, an increase of 25 percent from fourth quarter 2010 reported earnings of 0,51 USD per diluted share.
«In 2011 we started to build a foundation upon which we can grow», said John Bryant, Kellogg Company´s president and CEO. «We are pleased to have again posted very strong revenue growth and we have continued to make the investments necessary for future growth. Without the impact of the compensation costs and the supply-chain investment, our underlying operating profit increased in line with the company´s long-term target of mid single-digit growth. We will further improve our supply chain in 2012, but, as importantly, we will also focus our efforts on increasing investment in brand building and launching even stronger innovation».
North America
Kellogg North America reported net sales growth of 5,6 percent in 2011 and 6,6 percent in the fourth quarter. Internal sales growth was 5,3 percent in 2011 and 6,7 percent in the fourth quarter. North America Retail Cereal posted internal net sales growth of 3,9 percent in 2011 and 1,5 percent in the fourth quarter. North America Retail Snacks posted internal net sales growth of 4,7 percent in 2011 and a strong 8,1 percent growth rate in the fourth quarter. The North America Frozen and Specialty Channels businesses delivered strong internal revenue growth: sales increased by 9,7 percent in 2011 and by 13,5 percent in the fourth quarter.
North American operating profit increased by 18 percent on both a reported and internal basis in the fourth quarter. Full-year North American reported operating profit declined by 0,8 percent; full-year internal operating profit declined by 1,2 percent as the result of the previously mentioned supply-chain initiatives, the reinstatement of incentive compensation costs and continued high-levels of commodity inflation.
International
Kellogg International reported net sales growth of 8,3 percent in 2011 and 2,9 percent in the fourth quarter. Internal sales growth was 2,8 percent for the full year and 4,7 percent in the fourth quarter. The Latin American business posted internal sales growth of 10,3 percent in 2011; internal growth in the fourth quarter was 15,1 percent. Full-year growth was driven by strong underlying sales in the Mexican business. Internal net sales in the European business decreased at a 0,7 percent rate for the full year and by 1,3 percent in the fourth quarter. The Asia Pacific business posted internal sales growth of 4,1 percent for the full year and 8,2 percent in the fourth quarter.
Kellogg International´s reported full-year operating profit increased by four percent and internal operating profit decreased by 2,4 percent. Kellogg International´s fourth quarter reported and internal operating profit increased by 32,3 percent and 33,1 percent, respectively. Latin America´s internal operating profit declined by 9,9 percent in the fourth quarter. Europe´s fourth-quarter internal operating profit decreased by 11,2 percent due to a continued difficult trading environment in the United Kingdom and higher input costs. Asia Pacific´s internal operating profit increased by 430,3 percent in the quarter driven by an impairment charge associated with our Chinese business that occurred in the fourth quarter of 2010. Without the impact of this charge, operating profit would have increased by approximately 50 percent.
Interest and Tax
Kellogg´s interest expense totalled 55 million USD in the fourth quarter, an improvement from the same quarter in 2010. The reported effective tax rate for the quarter was 32 percent; the tax rate for the full year was 29 percent.
Cash flow
Cash flow, defined as cash from operating activities less capital expenditures, was slightly more than one billion USD for the full year. Kellogg repurchased approximately 800 million USD of shares during the year and has approximately 650 million USD of its 2,5 billion USD three-year share repurchase authorization remaining.
Kellogg Reaffirms 2012 Earnings Guidance
The Company reaffirmed its guidance for internal net sales growth, which is expected to increase by four to five percent, greater than long-term annual targets and reflecting both improvement in price/mix and a stronger innovation pipeline. Kellogg expects full-year operating profit to be unchanged or slightly greater as the company continues to invest in future growth. Full-year, currency-neutral earnings per share are anticipated to grow between two percent and four percent including the impact of continued investments in supply chain, an update of the company´s SAP platform, an increase in the level of investment in brand building and a benefit from the three-year 2,5 billion USD share repurchase program.
Bryant: «We remain very pleased with our revenue growth and the underlying strength of our businesses. We participate in attractive categories and our brand-building and innovation programs are strong. While we recognize that 2011 and 2012 are transition years, we are confident that we are making the right investments in the company and in future growth».
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