Profit drop does not sour supply chain investment for Kellogg

FMCG SUPPLIER NEWS

ProcurementLeaders.com - Feb 6th 2012, 09:06

Kellogg Company has committed itself to an on-going supply chain investment programme in 2012, despite publishing financial results showing that the initiative contributed to a fall in profits for its last financial year. 

Reported full-year 2011 operating profit was $2.0bn, a decline of 0.7%; internal operating profit, which excludes the effects of foreign currency translation, declined by 2.9%. According to the company, its supply chain investment programme was a major factor in this decline.

“This anticipated decline was the result of the company’s supply-chain initiatives, the reinstatement of incentive compensation costs, and continued high-levels of commodity inflation. Operating profit for the company was $397m, a reported increase of 20.3%; internal operating profit increased by 20.5%, the company said in a statement.

For its fourth quarter Kellogg reported net sales increased to $3.0bn, or by 5.4% from the fourth quarter of 2010. Internal net sales, which exclude the effects of foreign currency translation, increased by 6.0% over the same period.

Full-year 2011 reported net sales increased to $13.2bn, or by 6.5% from the $12.4bn posted in 2010. Internal net sales increased by 4.5% over the same period.

"In 2011 we started to build a foundation upon which we can grow," said John Bryant, Kellogg Company’s president and chief executive officer.

"Without the impact of the compensation costs and the supply-chain investment, our underlying operating profit increased in line with the company’s long-term target of mid single-digit growth.”

He went on to explain that the supply chain investment programme would continue: “We will further improve our supply chain in 2012, but, as importantly, we will also focus our efforts on increasing investment in brand building and launching even stronger innovation."

Kellogg North America reported net sales growth of 5.6% in 2011 and 6.6% in the fourth quarter. Kellogg International reported net sales growth of 8.3% in 2011 and 2.9% in the same period.