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Kellogg’s report a loss as cereal sales falter

Kellogg’s has reported a loss, with Q4 comparable net sales decreasing by 2.2 percent and full-year 2014 net sales by 1.4 percent to $14.6 billion.

The company’s quarterly operating loss was $422 million; including a significant non-cash mark-to-market adjustment of $822 million, which was primarily driven by the impact that changes in interest rates had on pension plans; comparable operating profit decreased by 0.1 percent in the fourth quarter.

Comparable results for operating profit exclude the effects of foreign currency translation, acquisitions, dispositions, Project K costs, mark-to-market accounting, differences in the number of shipping days, integration costs, and other factors that affect comparability.

Full-year operating profit decreased by 63.9 percent; including significant impacts from the effect of mark-to-market adjustments and costs associated with Project K. Full-year comparable operating profit decreased by 3.9 percent.

John Bryant, chief executive officer, Kellogg’s, said “after a disappointing 2014, we are building a platform for growth over the coming year.”

Bryant said the company expects the full year comparable net sales to be approximately flat, but this would be a significant improvement from the trends in 2014.

“One of the key drivers of success is targeting realistic goals, which can be achieved over the long-term.”

The company reduced its expectations for this year, setting the goal of “low-single-digit top-line growth for the total business.”

According to Business Day, the company has been cutting jobs and boosting efficiency – part of a program called "Project K." In November 2013, Kellogg announced plans to eliminate 7 per cent of its global workforce, or about 2,000 positions.

"We're not relying on Project K to drive bottom-line results," Bryant said. "We're investing Project K back into the business – we've got to get this business back to growth."

Bryant said sales of Special K brand products have weakened because consumers shifted away from foods promoted as "diet" in favour of what the industry is calling "functional" foods – products with fewer ingredients, added protein and other features that are perceived as healthy rather than simply lower in calories.

"Simple food, clearly less refined, if you like – that's what I think consumers are looking for, as well as satiation," he said.

"We have been addressing the challenges we have faced in some of the company's developed businesses," Mr Bryant said. "We expect that 2015 will be a rebuilding year for us and that our investment will provide a strong platform for future growth."

 

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