What Drove Kellogg’s Better-than-Expected 1Q17 Results?

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Part 4
What Drove Kellogg’s Better-than-Expected 1Q17 Results? PART 4 OF 6

How Kellogg’s International Segments Performed in 1Q17

European sales plunged

Kellogg’s (K) international business’s comparable sales (excluding acquisitions and the impact of Venezuela operations) fell in Europe and Latin America. This fall was partially offset by high-single-digit growth in Asia. Sales in Europe plunged 14.3% in 1Q17. Meanwhile, comparable sales fell 14.8%. Lower shipments due to customer-specific interruptions related to Pringles pricing and adverse currency movements dragged the results down. Meanwhile, the company’s cereal business also fell in the UK. Going forward, management expects the company will continue to see challenges in the region due to lingering impacts in 2Q, tough comparables, and currency headwinds.

How Kellogg’s International Segments Performed in 1Q17

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Kraft Heinz (KHC) and Mondelēz (MDLZ) also witnessed sales declines in their European business mainly on account of the strong US dollar.

Latin America driven by acquisition

Sales in Latin America rose 15.8% driven by acquisition. However, on a comparable basis, sales fell 3.8% due to distributor transitions in Central America and Peru. The fall was partially offset by a strong performance in Mexico from increased sales in high-frequency stores and increased demand for kids cereal brands. Also, Pringles generated double-digit growth in Brazil, Colombia, and Mexico. Going forward, management remains upbeat and expects to generate healthy sales in the region in the coming quarters.

Asia-Pacific remained strong

In Asia, sales rose 7.3% driven by a rise in volume and pricing. Region-wise, sales rebounded in India after the demonetization, while the company saw improved sales in Japan and Korea. Pringles had a strong quarter driven by the expansion of small cans in Korea and the launch of a new variety in Japan. Management expects to see strong sales and profitability in this region in the future.

You can get indirect exposure to Kellogg through ETFs such as the Consumer Staples Select Sector SPDR ETF (XLP), which invests 1.1% of its portfolio in the company.


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