The Economy

Kellogg’s Q1 Earnings Fall; CFO Retiring

Unfavorable foreign exchange rates and higher interest expenses contributed to a 33% drop in net income.
Katie Kuehner-HebertMay 5, 2016

Kellogg posted better-than-expected earnings for the first quarter on the same day the Battle Creek, Mich.-based company announced the retirement of CFO Ron Dissinger.

Kellogg said that net income fell 33% to $175 million, or 49 cents a share, due to negative impacts from mark-to-market accounting, up-front costs associated with efficiency and effectiveness initiatives, the remeasurement of the Venezuelan business, and interest costs from a bond tender. Excluding these items, currency-neutral comparable earnings were $1.33 per share.

Net sales fell by 4.5% percent to $3.4 billion, primarily due to the effect of currency translation, but currency-neutral comparable net sales rose 6.6%.

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Analysts polled by Thomson Reuters expected per-share profit of 94 cents and revenue of $3.47 billion.

“We have made good progress on our priorities:  We have continued to improve our food; we’ve continued to expand the Pringles business; we’ve enhanced our sales capabilities; productivity initiatives continue to provide earnings visibility; and continue to feel momentum building,” Kellogg’s chairman and chief executive John Bryant said in a press release.

Kellogg last year adopted zero-base budgeting, a popular financial tool among U.S. food makers as a result of the need to slash costs amid weak demand for traditional packaged foods, according to The Wall Street Journal.

The company on Thursday also announced that Dissinger would retire as CFO by yearend, but would remain with Kellogg into 2017 to help ensure an orderly transition to his successor. The company has embarked on both an internal and external search for a new finance chief.

“Over the years, we have relied on Ron’s business acumen, disciplined approach to finance, and extensive knowledge of our global organization to provide strategic financial leadership across every aspect of our business,” Bryant said in a separate press release.

Dissinger also led or played a central role in a number of other major initiatives, including the acquisitions of Pringles and Egyptian packaged biscuits company Bisco Misr, and the development of the company’s 2020 Growth Plan.