Kellogg raises forecast after review

Kellogg, the world’s largest cereal company, has raised its annual earnings forecast after its cost-cutting programme helped make up for a slumping breakfast business.

Profit will be $4.11 to $4.18 a share this year when removing the effects of currency, the company said in a statement yesterday. It had previously projected $4 to $4.07 a share.

Kellogg’s move to embrace zero-based budgeting — an increasingly popular form of cost cutting in the food industry — is boosting its margins.

The company also benefited from growth of Pringles potato chips and a less-dire-than-expected business in Venezuela, which has suffered from runaway inflation.

“We’re making good progress on our priorities,” chief executive John Bryant said in the statement.

The belt-tightening programmes are “contributing to more profit-margin expansion than we previously anticipated,” he said.

The stock rose up to 3.7% to $84.10 in New York trading after the results were posted, marking the biggest intraday jump in more than a month. It had already gained 12% this year to Wednesday.

Last quarter, profit was 91c a share, excluding some items, which matched analysts’ estimates. But sales fell more than 6% to about $3.26bn in the quarter, worse than the average projection of $3.36bn.

Kellogg is still trying to turn around its struggling morning-foods division, which has been hurt by a prolonged slump in US cereal sales.

The company, known for brands like Special K and Froot Loops, said the category can stem its recent declines this year as adults embrace the breakfast staple as a snack.

Bryant said the company’s cereal slowdown is largely because of the Special K brand, which has been hurt as dieters shift to a more holistic view of wellness.