Kellogg Misses on Lower Sales

| About: Kellogg Company (K)
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Kellogg Company (NYSE:K) reported fourth-quarter results with earnings of 46 cents per share. Earnings were below the Zacks Consensus Estimate of 48 cents and down 2.1% year over year.

Quarterly net sales declined 1.1% to $2.9 billion driven by benefits from price/mix (+3.3%) and favorable currency translation (+3.6%) which were offset by tonnage (-1.4%). Internal sales, excluding impact of currency translations, increased 2.0%.

In North America, net sales declined 4.0% (internal growth 2%) for the quarter. For the full year, net sales rose 1% driven by Cereals (4%) and Snacks (3%), partially offset by declines in Frozen (-1%) and Specialty categories (-1%).

Kellogg’s International operations reported net sales growth of 6% (internal sales increased 2%) for the quarter. For the full year, sales for International operations posted a 7% decline to $4.1 billion (internal sales grew 3%). Internal sales for Kellogg International comprise Latin America's net sales growth of 7%, Asia Pacific's growth of 5% and Europe’s growth of 2%.

Gross margin for the quarter expanded 352 basis points (bps) to 43.9% versus 39.4% in the comparable prior-year quarter. The increase was primarily due to benefits of pricing and moderation of commodity costs. The operating margin for the quarter also expanded 38 bps to 12.1% versus 11.8% in the prior-year quarter.

Kellogg’s continues to deliver strong cash flow of $1.3 billion for the full year. The company has a debt-to-capitalization ratio of 68%.

Based on the performance in fiscal 2009, management has raised its guidance for fiscal 2010. Earnings growth is now expected in the range of 11% and 13% on a currency-neutral basis (excluding the effects of foreign-currency translation). Previous guidance was 10% to 12%.

The company re-affirmed its internal sales guidance of 3% - 4% for the year, which is above the company's long-term targets.