Kellogg Company (NYSE:K) is likely to raise the price of consumer favourites such as Corn Flakes and Pringles to protect margins amid expectations of high-cost inflation this year.
The company saw operating profits fall by 14% in the fourth quarter of 2021 to US$329mln, while net sales contracted by 1.3% to US$3.4bln.
The latest results undid positive gains in the first three quarters of last year, with full-year profits down 2% on 2020.
The company said its key planning assumptions for 2022 rested on heavy input-cost inflation in the first half of the year which it intends to pass onto consumers through higher prices on its products.
The company’s losses in the last quarter were exacerbated by labour shortages from a three-month strike beginning in October in its US facilities, and a fire at one of its factories that significantly reduced its production capacity.
"After our supply was further disrupted by the fire and strike, we are recovering production, inventory and service levels and commercial programmes in that (US cereal) business," chief executive officer Steven Cahillane told analysts on a call.
Planned price rises mean the company was able to update its guidance for 2022, projecting net sales growth of 3%, with operating profit and earnings per share (EPS) forecast to rise by 1–2%.
Kellogg’s share price rose by 3.11% over the day following the announcement of upgraded 2022 earnings expectations, as analysts had already priced in the previous disruption.