Kellogg (NYSE: K) reported a 35% dip in earnings for the third quarter of 2019 due to certain multi-employer pension withdrawal liabilities. However, the results exceeded analysts’ expectations.
Net income attributable to the company plunged by 35% year-over-year to $247 million or $0.72 per share. Adjusted earnings decreased by 2.8% to $1.03 per share due to the absence of results from the divested businesses as well as adverse currency translation.
On a currency-neutral basis, adjusted earnings per share declined less than 1% as the divestiture impact and cost pressures on currency-neutral operating profit more than offset a benefit from the favorable resolution of uncertain tax positions.
As expected, profitability was weighed down by cost pressures and investments, but most of the decline was due to certain multi-employer pension withdrawal liabilities and business and portfolio realignment charges. This was partially offset by a reduction in Project K restructuring charges.
Net sales declined by 3% to $3.37 billion. The absence of two months of results in the quarter from the late July divestiture of its cookies, fruit snacks, pie crusts, and ice cream cones businesses pulled down net sales by nearly 4% while adverse currency translation negatively impacted net sales by more than 1%.
Sales from North America declined by 6% due to the absence of results from the divested businesses. Kellogg Europe recorded a 1% decline in sales because of unfavorable currency translation. Sales from Latin America rose by 2% despite negative currency translation, and that from Asia Pacific, the Middle East, and Africa increased by 6%.
For the full year 2019, Kellogg reaffirmed its net sales growth to be in the range of 1% to 2% year-on-year on both a currency-neutral and organic basis. The currency-neutral adjusted earnings are anticipated to decline by about 10% primarily reflecting the lapping of year-ago tax benefits, lower other income related to beginning-of-year pension assets, and the impact of the divestiture.
The currency-neutral adjusted operating profit is still predicted to decline in the range of 4% to 5%. Cash flow is expected to be about $0.5 billion for the year. This primarily reflects the impact of the divestiture.