On November 8, 2023, Kellanova Co (K, Financial) released its third-quarter earnings report, marking its last quarter as Kellogg Company before the spin-off of its North America cereal business. The company faced a challenging environment with adverse currency translation and the divestiture of its business in Russia, which held net sales flat. However, Kellanova achieved a 4% organic growth, aligning with its long-term targets.
Financial Performance Overview
Kellanova reported a slight decrease in net sales to $3,939 million, down 0.2% from the previous year. However, organic net sales, which exclude currency and divestiture impacts, rose by 3.9% to $4,062 million. The company's operating profit experienced a robust increase, with reported operating profit jumping 30.5% to $482 million and adjusted operating profit climbing 11% to $498 million.
Despite these gains, reported diluted earnings per share decreased by 13.3% to $0.78, impacted by a non-cash loss on divestiture and higher interest rates, among other factors. Adjusted diluted earnings per share, which excludes one-time items, saw a modest increase of 2% to $1.03.
Cash Flow and Balance Sheet Strength
Year-to-date net cash provided by operating activities was $1,400 million, a significant improvement from $1,180 million in the prior year. Capital expenditures increased to $506 million, reflecting a rebound from last year's reduced investment. Free cash flow for the first nine months stood at $894 million, surpassing the previous year's $830 million.
Segment Performance
Kellanova's North America segment faced slight net sales declines due to rising price elasticities, while Europe, Latin America, and AMEA regions showed varying degrees of growth in net sales and operating profit, with Latin America particularly strong at 19% net sales growth and 48% operating profit growth.
Outlook and Strategic Direction
As Kellanova embarks on its first quarter as a standalone entity, it anticipates net sales of approximately $3.1 billion and an adjusted operating profit between $380 million and $390 million. Adjusted earnings per share are projected to be between $0.73 and $0.76, reflecting a modest decline from the prior year.
We are proud to complete our final quarter as Kellogg Company with a solid financial performance, even amidst challenging industry conditions and the execution of the spin-off of our North America cereal business," said Steve Cahillane, Kellanova’s Chairman, President and Chief Executive Officer. "Our restoration of profit margins continued, and our advantaged brands and markets delivered top-line growth in line with our long-term targets even as industry-wide price elasticities continued to rise. Our brands are strong, our profitability is improving, and our free cash flow and balance sheet give us financial flexibility, positioning us well as we launch into the Kellanova era."
For a detailed analysis of Kellanova's financials and strategic initiatives, investors and interested parties are encouraged to visit Kellanova's investor relations website.
Explore the complete 8-K earnings release (here) from Kellanova Co for further details.
