Kellogg Rises on Sales Growth; Invests More in Supply Chain

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Kellogg (K) raised prices in the fourth quarter, allowing the company to boost earnings even as commodity prices rose. The company also began addressing concerns about its supply chain.

Kellogg posted 64 cents of EPS, two cents ahead of expectations, and reported slightly better than expected revenue.

The company has recently been pressured to reexamine its wide cost cuts over the past few years; last year Moody’s said it was reviewing the company’s ratings because of concerns about how much the company was cutting from its plants and how that might affect food safety. And the company has had two damaging recalls in recent years.

Kellogg spent more on its factories to assuage those concerns in the past quarter, and expects to continue that trend. CEO John Bryant noted that without those extra expenses and somewhat higher compensation costs, Kellogg was on track to meet its long-term earnings growth rate.

“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. 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 shares rose 2.6% in morning trading.



Original Article Source by Barrons.com