Kellogg Company (NYSE: K) topped market estimates on earnings for the first quarter of 2019 but revenues fell short of expectations. Shares were down 5.4% in premarket hours on Thursday.
Net sales were $3.52 billion, up 3.5% from last year, mainly due to the consolidation of Nigerian distributor Multipro. Organic net sales grew by 0.3%.
Net income attributable to Kellogg Company fell 35% year-over-year to $282 million, or $0.82 per share, due to business realignment charges, mark-to-market impacts and a higher effective tax rate.
Adjusted EPS fell about 18% to $1.01, negatively impacted by a higher effective tax rate, negative currency translation, lower returns on pension assets, and higher interest expense associated with the company’s Nigerian operations.
Net sales for Kellogg North America fell by less than 2% year-on-year, pulled down by declines in cereal and frozen foods. Reported net sales decreased 4% and 3% for Kellogg Europe and Kellogg Latin America respectively, mainly due to adverse currency impacts. Sales jumped 60% in Kellogg AMEA, due to the consolidation of Multipro results.
Last month, Kellogg reached an agreement to sell its selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses to Italian confectionery giant Ferrero for $1.3 billion. The transaction is expected to close by the end of July.
Kellogg updated its full-year 2019 guidance to reflect the impact of the pending aforementioned divestiture. The company estimates the divestiture will reduce net sales by approx. 2-3% and adjusted EPS by less than 5%.
On top of an unchanged outlook for the overall business, this would suggest approx. 1-2% growth in currency-neutral net sales, with no change to the outlook for organic growth of 1-2%, and a decline of approx. 10-11% in currency-neutral adjusted EPS in 2019.
In a separate press release, Kellogg announced that its Chief Financial Officer, Fareed Khan, is leaving the company on July 1, after the completion of the second quarter. He will be succeeded by Amit Banati, who is currently President, Kellogg Asia Pacific, Africa & Middle East (AMEA).
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