On August 6, 2024, WK Kellogg Co (KLG, Financial) released its 8-K filing detailing its financial results for the second quarter ended June 29, 2024. WK Kellogg Co, the second-largest cereal manufacturer in North America, produces well-known brands such as Special K, Frosted Flakes, and Froot Loops. The company, which began trading independently in October 2023 following its spin-off from Kellanova, generates the majority of its sales from North America.
Performance Overview
WK Kellogg Co reported net sales of $672 million for the second quarter, a 3.9% decline year-over-year, missing the analyst estimate of $672.64 million. Adjusted net sales also declined by 2.7% year-over-year. The company reported a net income of $31 million, translating to an earnings per share (EPS) of $0.36, which misses the analyst estimate of $0.40.
Financial Achievements and Challenges
The company’s reported net income margin for the second quarter was 4.7%, while the adjusted EBITDA margin stood at 11.6%. Despite a challenging business environment, WK Kellogg Co managed to increase its reported net income by 14.8% year-over-year. However, adjusted EBITDA declined by 12.4% year-over-year, reflecting the lapping of a $16 million one-time insurance proceeds in the prior year period.
“Our second quarter results are in line with expectations, and we are on track to achieve our full-year financial guidance despite a difficult business environment,” said Gary Pilnick, Chairman and Chief Executive Officer.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Net Sales | $672 million | $700 million | -3.9% |
| Net Income | $31 million | $27 million | 14.8% |
| EBITDA | $70 million | $50 million | 40.0% |
| Adjusted EBITDA | $78 million | $89 million | -12.4% |
Supply Chain Modernization
WK Kellogg Co announced additional details of its strategic priority to modernize its supply chain, including planned capital investments of up to $390 million and one-time cash restructuring and non-restructuring costs of approximately $110 million. The company aims to enhance supply chain effectiveness and efficiency, which is expected to support top-line delivery and drive margin expansion.
“Today’s announcement regarding modernizing our supply chain marks a significant step forward in executing our strategy and enhancing WK Kellogg Co’s long-term strength and resilience,” added Pilnick.
Balance Sheet and Cash Flow Highlights
For the year-to-date period ended June 29, 2024, WK Kellogg Co reported net cash provided by operating activities of $37 million, a significant decrease from $140 million in the prior year period. The company’s free cash flow was negative $10 million, compared to $80 million in the previous year, primarily due to higher capital expenditures.
Outlook
WK Kellogg Co reaffirmed its 2024 financial guidance, expecting adjusted net sales growth to be at the lower end of the guidance range of -1.0% to 1.0%, and adjusted EBITDA growth of 3.0% to 5.0%. The company’s focus on supply chain modernization is anticipated to drive long-term margin expansion and operational efficiency.
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Explore the complete 8-K earnings release (here) from WK Kellogg Co for further details.
