Kellogg to replace CFO as shares drop
The breakfast foods and snacks maker reported a 36.5 percent decline in first-quarter earnings, citing a strong U.S. dollar and higher costs.
The maker of Pop Tarts, Eggo Waffles, Pringles snacks and a wide range of cereals including Rice Krispies and Froot Loop, said CFO Fareed Khan will be replaced on July 1 by Amit Banati, who heads the company’s Asia Pacific, Africa and Middle East business. Banati began working at Kellogg in 2012 and has held positions at Mondelez International and Procter & Gamble Co.
In addition to the stronger dollar, earnings were hit by higher spending on divestitures, transportation and raw materials costs. Excluding items, Kellogg’s results beat analyst estimates.
Kellogg’s results weighed on rival packaged food stocks, with Kraft Heinz down 2.7 percent and Campbell Soup down 1.2 percent.
In recent years, packaged food companies have struggled with surging costs, while consumers have shifted to healthier foods and trendier upstart brands. Pricing pressure has been intense as grocery stores competed aggressively against Amazon.com Inc.
Sales in North America, Kellogg’s biggest unit, fell 1.8 percent, hurt by a recall of some RxBar protein and lower cereal and frozen food sales.
Battle Creek, Michigan-based Kellogg Chief Executive Officer Steve Cahillane said on a call to discuss earnings, “our recall of certain RXBARs required inventory write-offs at our customers, pressuring net sales and profit.”
Cahillane said Kellogg increased prices in the region during the quarter, which could help sales in the current period.
Net income attributable to Kellogg fell to $282 million, or 82 cents per share, in the quarter ended March 30. Excluding items, Kellogg’s earnings were $1.01 per share, topping analysts’ estimates of 95 cents, according to IBES data from Refinitiv.
Net sales rose 3.6 percent to $3.62 billion. Kellogg’s 2018 acquisition of a 50 percent stake in Multipro, a sales and distribution company in Nigeria and Ghana, helped drive a 60 percent jump in Asia, Middle East and Africa business sales.
Organic sales – excluding M&A and foreign exchange impact – rose 4 percent on strong sales of Pringles snacks. Sales at all Kellogg’s other businesses declined during the quarter.
In a move to focus on its core cereals and snacks business, Kellogg last month agreed to sell its Keebler biscuits brand and other assets to Nutella maker Ferrero for $1.3 billion.
The divestment could help Kellogg pay down debt and reinvest in its brands, Bernstein analyst Alexia Howard wrote in a note. Kellogg said the sale would reduce 2019 net sales by about 2-3 percent.
Yetunde Adegoke (Reuters)