Kellogg Delivers Strong Q3 2009; Raises Full-Year 2009 Guidance, Sets Targets for 2010
Q3 2009 Financials converted to Excel


BATTLE CREEK, Mich., Oct 29, 2009 (GlobeNewswire via COMTEX News Network) -- Kellogg Company (NYSE:K) today reported third quarter 2009 financial results that included strong internal net sales and internal operating profit growth. Third quarter net earnings were $361 million, a 6% increase from last year's third quarter net earnings of $342 million. Earnings per diluted share were $0.94 for the quarter, a year-over-year increase of 6% on a reported basis and 12% higher on a currency-neutral basis despite higher up-front costs.

"The current economic environment has placed significant pressure on our consumers," said David Mackay, Kellogg Company chief executive officer. "However, the environment also provided us with both the incentive and the opportunity to build an even stronger company for the future. We are aggressively pursuing productivity initiatives, as well as taking advantage of media deflation and efficiency programs to invest even more back into advertising to further drive the long-term health of our brands."

Third quarter reported net sales were $3.3 billion, representing a 0.3% decrease versus the third quarter of 2008. However, internal net sales growth, which excludes the effects of foreign currency translation and acquisitions, rose 3%, in line with the Company's long-term annual growth targets. Kellogg North America posted net sales growth of 1% on a reported basis, and 2% on an internal basis, building on strong year-ago internal net sales growth of 9%. Internal net sales growth for Kellogg North America consisted of 2% internal net sales growth delivery from North America Retail Cereal, 3% growth from North America Snacks, and a decline of 3% from North America Frozen and Specialty Channels.

Kellogg International posted a third quarter net sales decline of 4% on a reported basis; however, net sales grew 6% on an internal basis, which excludes the effects of currency translation and acquisitions. Internal net sales for Kellogg International consisted of Latin America's internal net sales growth of 9%, Asia Pacific's growth of 4%, and Europe's growth of 5% versus the third quarter of last year. Of particular note is Europe's strong return to internal net sales growth in the back half of the year, in line with guidance from the Company's second quarter conference call.

Operating profit for the third quarter of $567 million was a solid 6% increase on a reported basis, and a strong 11% increase on an internal basis. Total up-front costs for cost-reduction initiatives totaled approximately $0.06 per share, out-pacing 2008's third quarter up-front costs of $0.01 per share. Gross margin for third quarter 2009 of 43.9% represents a 120 basis point increase over last year's third quarter on a reported basis.

The benefit to third quarter earnings per share from favorability below the operating profit line in items such as interest expense and a lower effective tax rate was more than offset by unfavorability in other income and expense.



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