Kellogg’s 2nd-quarter net rises on higher prices

BATTLE CREEK, Mich. -- Kellogg Co.’s second-quarter profit rose 14 percent as the world’s largest cereal maker benefited from higher prices, new products and improved cereal sales.

Kellogg’s results also were boosted by a comparison from last year when it was hobbled by slow sales and major product recalls. The company, based in Battle Creek, Mich., raised its revenue guidance for the year but left its earnings forecast intact.

“We are beginning to rebuild our momentum following a very difficult 2010,” Kellogg’s CEO John Bryant told investors.

Kellogg, like many food companies, raised prices to offset soaring costs for ingredients and fuel. But unlike some of its competitors, it’s beginning to benefit from those adjustments. Its major competitor, General Mills Inc., has also raised prices and posted modestly profitable quarterly results, but the company told investors last month that its price hikes would not be enough to offset higher costs for the remainder of the fiscal year.

Kellogg, which makes products that include Frosted Flakes cereal and Nutri-Grain bars, said it will need to continue to raise prices through the remainder of the year.

Kellogg reported net income of $343 million, or 94 cents per share, for the quarter that ended July 2 compared with $302 million, or 79 cents per share, last year. Revenue rose 11 percent to $3.39 billion.

The results beat analyst expectations of 91 cents per share on revenue of $3.28 billion.

Kellogg’s revenue in North American rose 8 percent as cereal sales grew and new products, such as its gluten-free Rice Krispies, caught on with consumers. International revenue rose 16 percent, helped by higher prices and growth in Latin America while consumers in the U.K. continued to struggle due to the economic downturn.

The company also benefited from a reduced number of shares outstanding as a result of its share repurchase program, which helped its per share earnings for the quarter.

Kellogg raised its revenue growth guidance to a range of 4 to 5 percent for the year, based on higher prices to offset increasing costs. That’s up from earlier guidance of 4 percent. The company reaffirmed its earnings guidance for the full year of $3.42 and $3.49 per share. Analysts expect $3.48 per share.

Shares of the company rose sharply in morning trading on the news but fell 29 cents to $55.26 in midday trading.