Manufacturing & Supply Chain

Kellogg Company has lowered its guidance for the full-year of 2014 following a slump in sales and profits. Internal net sales are now expected to decline by between one and two percent. Underlying internal operating profit growth is expected to decline by between one and three percent.

In its second-quarter of 2014 Kellogg’s net sales decreased by 0.8% to $3.7 billion. Internal net sales, excluding the effects of foreign currency translation, acquisitions, dispositions, and integration costs, decreased by 1.5% over the same period. Second-quarter 2014 operating profit was down 18.1% to $467 million, driven primarily by costs associated with Project K, the company’s four-year efficiency and effectiveness program, and lower sales. Underlying internal operating profit, which excludes the effects of foreign currency translation, acquisitions, dispositions, mark-to-market accounting, integration costs, and costs associated with Project K, decreased by 7.2%. According to Kellogg, the decline in underlying internal operating profit was largely the result of lower sales, and investment in brand-building activities.

“We have announced earnings per share for the second quarter that were broadly in-line with our expectations. While we saw growth in various areas of our business including Pringles and the international segments, the cereal category in developed markets remained challenging,” says John Bryant, chairman and chief executive officer of Kellogg Company. “Our Project K efficiency and effectiveness program continues to go well, and we are in the very early stages of the increased investment we are making in our developed-markets business. We know that improvement will take some time, but we believe we are making the right decisions to drive profitable revenue growth in the future.”