CHICAGO Kellogg Co (K.N), the world's largest cereal maker, posted a better-than-expected jump in quarterly profit on Thursday as international sales and cost cuts helped offset tepid U.S. cereal sales growth.
The company stood by its full-year earnings forecast, saying it will spend more on advertising and product development. Shares rose 3.6 percent.
Like many food companies, Kellogg has been cutting costs to boost profits while sales have been pressured by intense competition in some areas.
One of those is the U.S. cereal market, where Ralcorp RAH.N is trying to win back market share for its Post cereals, said Edward Jones analyst Matt Arnold.
The cost cuts Kellogg has made over several years free up money to fight that competition.
"They were probably one of the first to move on the idea of ongoing productivity (gains) and religiously taking costs out, proactively, not reactively," Arnold said. "Now we are starting to see upfront costs coming down and cost savings coming in the door nicely."
The maker of Corn Flakes and Keebler cookies said that profit rose to $418 million, or $1.09 a share in the first quarter, from $321 million, or 84 cents a share, a year ago.
Analysts on average forecast 94 cents a share, according to Thomson Reuters I/B/E/S.
Sales rose 4.7 percent to $3.32 billion. Analysts on average forecast $3.29 billion.
North American sales rose 3 percent, with retail cereal sales up about 0.5 percent.
International sales rose 9 percent, though 7 percentage points of that increase was because of currency fluctuation.
The company forecast that earnings per share would rise 11 percent to 13 percent, excluding the impact of currency fluctuations.
The company also said its board of directors approved a $2.5 billion, three-year share repurchase plan.
Kellogg shares rose $1.91 to $54.49 on the New York Stock Exchange.
(Reporting by Brad Dorfman, editing by Dave Zimmerman, Maureen Bavdek and Robert MacMillan)