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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.
Kellanova
Kellanova
Kellanova Revenue by Segment
Kellanova Revenue by Geographic Location
Revenue by Segment
North America Revenue
CapyFin.comEurope Revenue
CapyFin.comLatin America Revenue
CapyFin.comAMEA Revenue
CapyFin.comRevenue by Geographic Location
North America Revenue
CapyFin.comEurope Revenue
CapyFin.comLatin America Revenue
CapyFin.comAMEA Revenue
CapyFin.com 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.
- Emerging markets feeling the impact of slowing economies.
- The Company expects to sustain direct costs around safety, sanitation, and labor.
- Substantial brand investment has shifted into the second half.
- Excluded from this guidance are any significant supply chain or other market disruptions related to the pandemic or global economy.
Revenue & Expenses
Visualization of income flow from segment revenue to net income