* EPS $0.92 tops Wall Street view of $0.83
* Raises full-year earnings view, ex-currency
* Sees less of a currency hit in 2009 than forecast
* Shares near flat
(Adds company comments)
By Brad Dorfman
CHICAGO, July 30 Kellogg Co (K.N) posted a
higher-than-expected quarterly profit and raised its full-year
earnings forecast on Thursday as costs for energy and grains
eased while price increases helped lift revenue.
Like many food companies, the maker of Frosted Flakes and
Pop-Tarts has seen an increase in sales as consumers eat more
at home, rather than at restaurants.
Kellogg also raised prices to cope with higher costs for
energy, grains and other raw materials. As commodity cost
inflation eases, and the higher prices stay in place, Kellogg's
margins get fatter.
The company said it expects commodity costs to rise about 4
percent for the year, but that is down from the 10 percent
increase seen in 2008.
Even when commodity costs were soaring, Kellogg still
invested in product development, cost-cutting measures and
advertising to help its long-term business.
"It seems that the input cost headwind is officially a
tailwind for these food companies," Edward Jones analyst Matt
Arnold said. "You couple that with what this company always
focuses on -- which is taking some costs out of the system --
and you get some nice margin improvement and another nice
Kellogg CEO David Mackay expects consumers to continue to
eat at home even after the economy improves, in part because
high unemployment has spooked them into being more frugal and
in part because they have found they enjoy eating at home.
"My personal view is that when the economy improves, what
we're seeing is going to be a generational change from the
consumer perspective," he said during an interview.
But Mackay also said he expects the economy to remain
"challenging" for at least the next year.
Kellogg's profit rose to $353 million, or 92 cents a share,
in the second quarter from $312 million, or 82 cents a share, a
Analysts on average forecast 83 cents a share, according to
Sales fell 3.4 percent to $3.23 billion. But excluding the
impacts of currency translation and acquisitions, sales rose
about 3 percent, in line with the company's long-term target,
North American cereal sales rose 4 percent in the quarter.
The company said its U.S. ready-to-eat cereal market share
rose more than 1 percentage point in the quarter. The company
also has seen share gains from lower-priced private-label
competitors moderating, Mackay said.
Like many companies, Kellogg has been pushing a cost-saving
message in its advertising, while also offering more coupons to
attract customers, Mackay said.
Volume, or tonnage of products shipped, slipped 0.5
percent. Price increases and a shift in its sales mix toward
higher-priced items boosted revenue 3.1 percentage points, the
Kellogg said it now expects earnings for the year to rise 8
percent to 10 percent, excluding the impact of currency
In April, the company said it forecast earnings per share
to rise in the high-single-digit percentage range in 2009,
excluding the impact of the stronger U.S. dollar, which reduces
the value of international sales.
The company now also expects currency to cut earnings per
share by only 6 percent, down from the 8 percent hit it had
forecast in April.
Kellogg shares rose earlier in the day, but were down 19
cents at $47.85 in early afternoon trading on the New York
(Reporting by Brad Dorfman, editing by Maureen Bavdek and Tim