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Kellogg’s lifts Q3 sales, reaffirms 2021 guidance

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November 4, 2021

Kellogg's lifted its Q3 2021 sales against the prior year period and reaffirmed its full year guidance despite a decline in net income, according to an earnings release.

Net sales increased 6% year on year for the quarter ending Oct. 2, 2021, rising from $3.43 billion to $3.62 billion, driven by positive price/mix in all four regions and strong year-on-year volume growth in emerging markets like Africa, Russia and Brazil.

On an organic basis, which excludes the impact of currency, the company's net sales grew 5%. Through the first nine months of the year, reported net sales increased 4%, aided by favorable foreign currency translation and driven by 3% growth on an organic basis, which excludes the impact of currency.

Net income dipped from $352 million to $305 million in the comparative quarters, primarily due to higher mark-to-market expense, partially offset by higher net sales and operating profit, as well as lower average shares outstanding.

Basic earnings per share dipped approximately 12% from $1.02 to 90 cents and diluted EPS dropped from $1.01 to 89 cents.

On an adjusted basis, which excludes mark-to-market and one-time charges, earnings per share increased 20% from 91 cents to $1.09.

The $3.62 billion in quarterly revenue beat analyst expectations by $80 million, while the non-GAAP EPS of $1.09 beat expectations by 16 cents and the GAAP EPS of 89 cents missed expectations by two cents, according to Seeking Alpha.

Shares traded at $63.34 today against a 52-week range of $56.61-$68.60.

"I'm incredibly proud of how our organization has executed through an extremely difficult operating environment, marked by economy-wide bottlenecks and shortages and high cost inflation," Steve Cahillane, chairman and CEO, said in a prepared statement. "That we could deliver strong third-quarter results and reaffirm our full-year earnings guidance in this environment is a testament to our strategy, our portfolio and our people."

Kellogg North America's reported net sales in the third quarter were approximately flat, as positive price/mix from revenue growth management actions and modestly favorable currency translation were offset by volume declines related to supply disruptions and lapping year-ago growth.

Kellogg Europe's third quarter reported net sales increased 14% driven by strong volume and price/mix growth and aided by favorable currency translation.

Kellogg Latin America's third quarter reported net sales increased 7%, which came on top of an exceptionally strong year-ago quarter.

Kellogg Asia Pacific, Middle East and Africa's third quarter reported net sales increased by 17%, despite adverse currency translation, led by significant growth in volume and price/mix in Africa, along with sustained cereal sales growth in Australia and Asia, and only partially offset by snacks shipments that were impeded by COVID-related production restrictions on Pringles for much of the quarter.

Reflecting underlying business momentum, Kellogg raised its full-year outlook for net sales, while reaffirming its guidance for operating profit, earnings per share and cash flow to reflect a current business environment of supply challenges and higher costs.

Organic net sales growth is now expected to be 2-3% in 2021, an increase from the prior guidance of 0-1%, despite lapping last year's exceptional growth. This implies a two-year compound annual growth rate of more than 3%.