Kellogg has reported net sales of $3.7 billion, an increase of 12.3%, for its third quarter. Reported operating profit was $479 million, an increase of 3.2%. However, internal operating profit declined by 4.9%. Higher commodity costs, last month's recall, and a high single-digit increase in brand-building investment all had an impact on operating profit. Internal results exclude the effects of foreign currency translation, the results from the recently-acquired Pringles business, integration costs, and divestitures.
In October, Kellogg said that it would take a charge of up to $30 million against the recall of 2.8 million packages of Mini-Wheats cereal in the U.S. due to possible contamination by pieces of metal mesh.
Reported third quarter 2012 net earnings were $296 million, an increase of 2.5% from the $0.80 per diluted share reported in the third quarter of 2011. This quarter's reported earnings per share included approximately $0.04 of integration costs related to the acquisition of Pringles. The cost of the recall announced last month was approximately $0.06 per share, which was offset by better-than-expected performance from the Pringles business and certain below-the-line items.
"We're pleased with the improving trends in our underlying performance, which is in-line with our expectations and includes strong revenue growth in many of our businesses," said John Bryant, Kellogg Company's president and chief executive officer. "We're also pleased that the Pringles business performed better during the quarter than we had expected. While it's early, we remain optimistic regarding the potential of this iconic brand."
The company reaffirmed its guidance for full-year internal net sales growth of between 2-3%. Due to the cost of last month's recall, the company now expects that full-year internal operating profit will decline between 4-6%. The company also reaffirmed its guidance for as-reported earnings per share to be in a range between $3.18 and $3.30 per share, including the cost of the recall and the anticipated impact of the Pringles acquisition.
