Kellogg's pricier cereals help bolster sales, profit forecasts

Kellogg's cold cereal products are pictured in a market after Kellogg Company announced it would split into three independent companies, in the latest U.S. corporate overhaul aimed at simplifying its structure and sharpening its focus on the snack business, in New York, U.S., June 21, 2022. REUTERS/Mike Segar

Aug 4 (Reuters) - Kellogg Co (K.N) raised its forecast for full-year earnings on Thursday after topping estimates for quarterly sales, as higher prices for its breakfast cereals and snacks helped it overcome cost-related challenges.

Shares of the company, which recently announced a three-way breakup to create businesses focused on snacks, cereals, and plant-based meat, rose 2.8% in trading before the bell.

Kellogg, like other global packaged food makers, has been largely successful in raising product prices to counter spiraling costs of freight, labor and ingredients without drawing the ire of consumers.

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However, analysts are warning that the company could hit a ceiling on price hikes as households tighten their bets amid raging inflation that shows no sign of cooling.

Kellogg, known for its Corn Flakes and Honey Loops cereals, said average selling prices were up 13.7% in the second quarter, while sales volumes dropped by a marginal 1.5%.

The company said it was expecting annual core net sales to increase in the range of 7-8%, compared with its prior forecast of about 4% growth.

It also expects adjusted full-year operating profit to rise 4-5% on a currency-neutral basis, above its previous expectation of 1-2% growth.

Net sales rose to $3.86 billion in the quarter ended July 2 from $3.56 billion a year earlier. Analysts on average were expecting sales of $3.64 billion, according to Refinitiv IBES.

Net income attributable to Kellogg fell to $326 million, or 95 cents per share, from $380 million, or $1.11 per share, a year earlier.

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Reporting by Mehr Bedi in Bengaluru; Editing by Anil D'Silva

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