Why cereal maker Kellogg plans to invest $420m in Nigeria

PUBLISHED: Thu, 03 May 2018 19:32:34 GMT

(Reuters) – Fruit Loops cereal maker Kellogg Co topped Wall Street forecasts for first-quarter profit and sales on Thursday, boosted by stronger sales of snacks including Pringles chips and protein bars.

Though Kellogg has lowered the sugar content in many of its popular cereals to win back health-conscious customers, much of the Battle Creek, Michigan-based food company’s business today is driven by sales of snacks such as Pringles chips and RXBARs.

Highlighting the falling demand for cereal in the United States, Kellogg on Thursday also announced a $420 million investment in Nigeria’s Tolaram Africa Foods, its distributing partner in Africa, which makes noodles in addition to cereal.

It is the latest in a handful of deals Kellogg has sealed in the past few years to diversify its business, including the acquisitions of protein bar brand RXBAR and Brazilian snacks group Parati.

The company did not disclose additional financial terms of the Tolaram investment.

“Cereal consumption remained soft, though the company made progress toward stabilizing the key health and wellness brands, including Special K,” Kellogg said in its earnings statement.

Kellogg’s sales rose 5 percent in the first three months of the year, the third consecutive quarterly increase, as shoppers also bought more Eggo waffles and veggie patties in addition to snacks.

Overall sales of $3.40 billion topped analysts’ expectations of $3.30 billion, according to Thomson Reuters I/B/E/S.

Kellogg said it expects net sales to rise between 3 percent and 4 percent in 2018 on a constant currency basis. The forecast includes gains from the Tolaram investment and translates to sales of $13.31 billion to $13.44 billion.

Kellogg’s net income rose to $444 million in the first quarter of 2018 from $266 million a year earlier.

Excluding one-time items, Kellogg earned $1.23 per share, handily beating expectations of $1.08.

Kellogg’s stock rose 3 percent to $58.47 on Thursday morning.

Reporting by Nivedita Balu in Bengaluru; Editing by Sai Sachin Ravikumar

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