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Jun 27, 2020
Kellanova Q2 2020 Earnings Report
Reported strong second quarter results and raised its full-year financial guidance.
Key Takeaways
Kellogg Company announced strong second quarter 2020 results driven by elevated at-home demand during the COVID-19 pandemic, particularly for cereal and frozen foods in developed markets. The company increased production to meet demand, resulting in higher profit margins. Strong cash generation enabled the Company to continue to enhance financial flexibility, leading to an increased full-year financial outlook.
Kellogg's priorities continue to be ensuring our employees' health and safety, supplying food to the marketplace, and aiding our communities.
The pandemic drove elevated at-home demand during the quarter, particularly for the Company’s cereal and frozen foods products in developed markets, leading to higher-than-expected net sales.
Kellogg increased production to keep up with demand and rebuild inventory, resulting in operating leverage that more than offset incremental costs, resulting in higher profit margins.
Better-than-expected results in the second quarter prompted the Company to increase its full-year financial outlook, with investment timing weighting the year’s profit and cash flow delivery to the first half.
Revenue by Segment
Revenue by Geographic Location
Forward Guidance
Kellogg Company raised its full-year financial guidance, reflecting sales and profit over-delivery in the first half of the year.
Positive Outlook
- Organic net sales growth is now expected to finish 2020 at approximately 5% year on year, up from previous guidance of +1-2%.
- Currency-neutral adjusted operating profit growth is now projected to finish 2020 at a decline of approximately (1)% year on year, an improvement from previous guidance of (4)%, and still weighed down by the absence of businesses divested in July, 2019.
- Currency-neutral adjusted earnings per share for the full year is now estimated to decrease by approximately (1)% year on year, from previous guidance of (3)-(4)%, and still weighed down by the absence of businesses divested in July, 2019.
- Net cash provided by operating activities is now expected to finish 2020 at $1.6 billion, the high end of the previous guidance range of $1.5-1.6 billion, with capital expenditure of approximately $0.6 billion.
- Cash flow is now expected to finish 2020 at approximately $1 billion, the high end of the previous guidance range of $0.9-1.0 billion.
Challenges Ahead
- The Company assumes at-home consumption growth will moderate to normalized levels by the fourth quarter, with away-from-home demand taking longer to recover.
Revenue & Expenses
Visualization of income flow from segment revenue to net income
Historical Earnings Impact
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Avg. Return Before/After Earnings
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