BATTLE CREEK, MICH. – The Kellogg Co. delivered strong bottom line results in the second quarter of fiscal 2021. The momentum resulting from the high levels of home consumption last year and double-digit growth in the markets emerging markets fueled the company’s performance.
But management has warned of uncertainty over how COVID-19 could affect markets around the world, supply chain disruptions related to labor and logistics, and manufacturing capacity constraints could adversely affect future performance.
Net income for the quarter ended July 3 was $ 380 million, or $ 1.12 per share on the common share, and an increase over the previous year when earnings were $ 351 million, or $ 1.02 per share.
Sales for the quarter reached $ 3.55 billion from $ 3.47 billion.
“Overall, in-home demand has remained high and we have seen a continued recovery in our out-of-home channels,” said Steven A. Cahillane, President, President and CEO, in a conference call on August 5 with securities analysts. “Most encouraging has been the momentum shown by the key long-term growth drivers for us.”
The volume declined from last year’s double-digit pandemic surge, but increased from the same period in fiscal 2019, said Amit Banati, chief financial officer.
The company’s North American snack business, which includes Pringles, Cheez-It, Pop-Tarts and others, continued to grow with a compound annual growth rate (CAGR) over one and two years.
“Consumption in the United States remains strong on a two-year CAGR basis, surpassing our three snack categories and dominated by strong brands,” Cahillane said.
Grain sales in North America edged down in the quarter due to lower AOH channels and capacity constraints.
“Frosted Flakes accounted for most of the decline in branding and merchandising exit share since the fourth quarter of last year, as we focused on maintaining service levels and adding capacities planned before the pandemic ”, declared Mr. Cahillane. “Unfortunately, our capacity expansion has been hampered by current supply shortages and our recent fire at one of our facilities. This will delay our return to normal commercial activity on the affected brands. “
Kellogg’s two frozen food businesses – breakfast and plant-based foods – also continued to grow on a two-year CAGR basis despite capacity limitations. Mr Cahillane said it was MorningStar Farms that was facing capacity issues.
Mr Banati said labor shortages, especially in distribution and logistics, have been a major challenge for the company.
“We have seen the cash freight market grow dramatically due to a shortage of drivers,” he said. “This impacts our operations in our factories in terms of labor only and the entire supply chain. So we also see it with our suppliers. So it’s generalized. “
Despite the challenges, management raised Kellogg’s sales forecast for fiscal 2021 from flat to flat to 1% and reaffirmed that earnings per share would be in a range of 1% to 2% over the course of the year. fiscal year 2020.
“We completed another quarter of strong execution and performance, ending a first half characterized by the following: Underlying business momentum, driven by our largest brands; unlock capacities to resume full commercial activity on certain products; sustained growth momentum in emerging markets; by leveraging enhanced capabilities from data and analytics to innovation through ESG, ”Cahillane said.
For the first six months of fiscal 2021, net income totaled $ 748 million, or $ 2.19 per share, an increase from the previous year when earnings were $ 698 million, or 2 .02 $ per share.
First-half revenue was $ 7.14 billion, compared to $ 6.88 billion in fiscal 2020.