Kellogg gets a boost from Pringles in third quarter

NEW YORK (AP) -- Kellogg Co.'s net income edged up in the third quarter, as the breakfast giant benefited from its acquisition of Pringles chips.

The Battle Creek, Mich.-based company -- best known for its Frosted Flakes, Pop-Tarts and Eggo waffles -- bought the brand earlier this year in hopes of becoming a global player in the salty snacks market. The deal instantly made Kellogg the world's second biggest salty snack food company, behind only PepsiCo Inc.'s Frito-Lay.

Since Pringles gets two-thirds of its revenue from overseas, Kellogg is also hoping the deal gives it inroads into the international markets where the ranks of people with more disposable income are growing.

"While it's early, we remain optimistic regarding the potential of this iconic brand," CEO John Bryant said in a statement.

During the third quarter, Kellogg said a stronger-than-expected performance by Pringles offset costs it incurred related to a Mini-Wheats recall last month. The cereal recall, combined with rising costs for ingredients and increased spending on brand building, reduced the company's core operating profit by 5 percent. The measure excludes results from Pringles.

For the period ended Sept. 29, Kellogg says it earned $296 million, or 82 cents per share, in the quarter. That compares with $290 million, or 80 cents per share, a year ago. The company said that integration costs hurt its results by 4 cents per share, and the recall reduced results by 6 cents per share. Not including such items, analysts on average expected a profit of 81 cents per share, according to FactSet.

Total revenue rose 12 percent to $3.72 billion, above the $3.7 billion analysts expected.

Not including the impact of the Pringles acquisition and other items, Kellogg said its key North American unit grew sales by nearly 4 percent. Its breakfast foods and Kashi unit posted sales growth of 5 percent.

International sales rose 15 percent to $1.3 billion, but sales of core brands rose just 1 percent. The struggling European unit saw a decline of 2.5 percent, but the company noted that was an improvement from the previous quarter.

Kellogg stood by its guidance for the year, with earnings expected to range between $3.18 and $3.30 per share. But it said operating profit will fall between 4 and 6 percent as a result the Mini Wheats recall. Kellogg recalled the cereal because of the possible presence of a flexible metal mesh from a faulty manufacturing part.

Its shares were unchanged in premarket trading Thursday at $52.32 per share.

Published: Fri, Nov 2, 2012


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