Kellogg forecasts better earnings

Kellogg has forecast 2013 earnings that look better than analysts expected as it continues turning around its business.

Kellogg had several product recalls in recent years after too many job cuts had left it vulnerable to problems, including food safety issues.

The company started reinvesting in operations in late 2011, and continued in 2012, also buying Pringles snacks and increasing its own new products and marketing.

“We are essentially a turnaround that is turning . . . and heading in the right direction,” said chief executive John Bryant. He said the company had “turned a corner” in improving its supply chain and that integration of Pringles and the implementation of new information technology remained “works in progress” for 2013.

Kellogg expects 2013 profit growth of 5 per cent to 7 per cent, translating into earnings of $3.82-$3.91 per share, including an accounting change and currency fluctuations, but excluding costs from integrating Pringles.

The 2013 forecast is greater than Wall Street expected, in part, because a change in pension accounting boosted 2012 earnings.

“These guys are making headway,” said Edward Jones analyst Brian Yarbrough. “If they can avoid more recalls I think they’re definitely setting themselves up for a pretty good 2013.”

Mr Yarbrough said the Pringles deal was important, but noted that improving operations and execution in its core business was crucial for restoring investor confidence.

In the fourth quarter, Kellogg posted a net loss of $32 million compared with a loss of $195 million a year earlier. Due to a change in the way Kellogg accounts for pensions, it recognised a year-end charge.

Net sales rose 18 per cent to $3.56 billion. Excluding foreign currency translation, acquisitions, divestitures and integration costs, sales rose 5 per cent, much better than some analysts expected. – (Reuters)