Kellogg Reports 7% Increase in Profit

By James Prichard

Grand Rapids, Michigan -- Kellogg (K) said Thursday its profit rose 7% during the fourth quarter despite costs related to the recent peanut-related recall.

Those expenses are expected to continue hurting the cereal and snack giant's net earnings in 2009. Kellogg narrowed its sales guidance for the year from mid-single-digit growth to between 3% and 4%.

The Battle Creek, Michigan, company said it earned $179 million, or 47 cents per share, during the three months that ended Jan. 3, compared with $176 million, or 44 cents per share, in the last quarter of 2007.

Revenue increased 5% to $2.93 billion.

Analysts surveyed by Thomson Reuters, on average, forecast earnings of 50 cents per share on revenue of $3.05 billion for the quarter.

Its brands include Pop-Tarts toaster pastries, Eggo frozen waffles, Cheez-It crackers and Special K cereal.

Last month, Kellogg voluntarily recalled products such as peanut butter crackers because of the possibility of salmonella contamination related to the recall. A few days later, it said federal authorities confirmed that salmonella was found in a single package of its peanut butter crackers.

Its costs from the recall reduced earnings per share by 6 cents during the quarter and are expected to do the same for all of 2009, the company said in a statement.

Kellogg shares fell 22% during the quarter, to finish at $43.85.

For all of 2008, the company reported a profit of $1.15 billion, or $2.99 per share, compared with $1.1 billion, or $2.76 per share, the previous year. Annual revenue climbed 9%, to $12.82 billion from $11.78 billion.