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Kellogg cuts 2012 guidance below Street view, citing weakness in sales; stock slides
NEW YORK (AP) ' Kellogg Co. on Monday blamed weak sales growth in the U.S. and Europe as it cut its 2012 forecast, a move that raised the stakes on the breakfast food giant's purchase of Pringles earlier this year.
The Battle Creek, Mich.-based company currently gets most of its revenue from North America, where growth in the packaged food industry has been relatively flat. But in February, Kellogg announced that it would pay $2.7 billion to buy Pringles potato snacks from Procter & Gamble.
The acquisition is intended to bring a dual benefit for Kellogg. The deal will strengthen the company's footprint overseas; Pringles are sold in more than 140 countries and the brand gets two-thirds of its revenue from abroad.
Kellogg is also hoping the deal helps it move beyond the breakfast table, as the appetite for on-the-go foods grows rapidly in emerging markets like China and India. Kellogg's cupboard of savory snacks currently include Cheez-It, Keebler's Club crackers and its new Special K crackers.
The Pringles purchase would catapult Kellogg to the No. 2 ranking among savory snack makers after PepsiCo Inc.'s Frito-Lay.
For 2012, Kellogg said that it now expects a profit of $3.18 and $3.30 per share. That includes a charge of 6 cents to 11 cents per share from its Pringles deal.
Analysts surveyed by Fact Set were predicting 2012 earnings of $3.48 per share.
Shares of Kellogg fell $3.10, or 5.7 percent, at $50.89 in afternoon trading. That is closer to its 52-week low of $48.10 set in late November. Its shares traded as high as $57.70 last May.
In early February, Kellogg had predicted 2012 net income would rise 2 to 4 percent, excluding changes in currency values, with another performance measure ' operating profit ' unchanged for the year. The company now says it expects operating profit to decrease 2 to 4 percent in 2012.
In 2011, Kellogg earned $1.23 billion, or $3.38 per share. Operating profit was $2 billion.
Kellogg also now anticipates that internal revenue ' which excludes the effect of changing currency values as well as acquisitions and sales of company divisions ' will grow 2 percent to 3 percent, down from the 4 percent to 5 percent range it predicted earlier this year.
For the January-March quarter, the maker of Eggo waffles, Frosted Flakes cereal and Pop Tarts said it earned $1 per share, unchanged from a year ago. Wall Street expected earnings of 99 cents per share. The company said revenue fell 1.3 percent during the quarter, suggesting revenue of $3.44 billion. Analysts were expecting $3.6 billion.
"We are obviously disappointed with the performance of the company in the first quarter of 2012. We faced more significant challenges in both Europe and in some categories in the U.S. than we expected," President and CEO John Bryant said in a statement.
The company will release full first-quarter results April 26.