BATTLE CREEK, MI — Kellogg Company announced its fourth quarter and full year 2021 results on Feb. 10 and provided a financial outlook for 2022.
Highlights:
- The company delivered full-year financial results consistent with its guidance across all metrics, despite a challenging operating environment that featured high cost inflation, worldwide supply disruptions as well as a labor strike and fire in the Company's North America cereal manufacturing facilities.
- Net Sales growth in 2021 was driven by positive price/mix and notable momentum in snacks and emerging markets.
- These trends continued in the fourth quarter, though net sales were negatively affected by lapping an extra week in the year-earlier period.
- The company issued 2022 financial guidance that calls for currency-neutral growth in net sales, operating profit, and earnings per share, even as it expects the challenging operating environment to persist.
"As we've closed the books on fiscal year 2021, I could not be more proud of our organization’s focus and determination to work through challenges and deliver on our financial commitments," said Steve Cahillane, Kellogg Company's Chairman and Chief Executive Officer. "Facing significant cost inflation, worldwide bottlenecks and shortages, and even a labor strike at all of our U.S. cereal facilities in the fourth quarter, the team executed with agility to deliver another year of on-guidance results."
Fourth Quarter & Full Year 2021 Consolidated Results
Kellogg's fourth quarter 2021 GAAP net sales declined by approximately 1% year on year as positive price/mix in all four regions partially offset the impact of adverse foreign currency translation and lapping a prior-year quarter that included an additional shipping week. On an organic basis, which excludes the impact of currency and the 53rd week, net sales increased by 5% year on year.
Full year 2021 reported net sales increased by approximately 3% year on year, driven by positive price/mix in all four regions as well as modestly favorable foreign currency translation, which together more than offset the impact of lapping the prior fiscal year that included a 53rd week. On an organic basis, net sales increased by 3.5%, despite lapping unusually strong, pandemic-aided organic growth in 2020; this was modestly higher than company guidance.
Fourth quarter 2021 reported operating profit declined by almost 15% versus the prior-year quarter, primarily due to the impact of supply disruptions worldwide, including a 12-week labor strike at the Company's U.S. cereal plants that followed a fire at one of the facilities last summer, as well as to adverse mark-to-market charges and lapping the year-ago quarter’s additional shipping week. On an adjusted basis, which excludes mark-to-market and restructuring charges, operating profit declined by 12%, and by 11% excluding currency.
Full year 2021 reported operating profit decreased by less than 1% year on year, and closer to flat on an adjusted basis. The decline was attributable to supply disruptions worldwide, including the fourth-quarter 2 labor strike and third-quarter fire, as well as accelerated cost inflation. Excluding currency translation, adjusted-basis operating profit declined 2%, in line with company guidance.
Fourth quarter 2021 reported earnings per share more than doubled year over year, despite the strike, fire and other supply disruptions worldwide, as well as a modestly higher effective tax rate that were more than offset by a favorable mark-to-market gain, and by lapping debt redemption costs in the year-ago quarter. On an adjusted and currency-neutral adjusted basis, earnings per share declined by less than 4%.
Full year reported earnings per share increased 19% from the prior year due primarily to a favorable mark-to-market gain, partially offset by the impact of the strike and fire in the second half, lower other income related to expected returns in pensions, as well as worldwide supply chain disruptions and accelerating cost inflation throughout the year. On an adjusted basis, earnings per share increased 4%. On a currency-neutral basis, adjusted earnings per share increased by approximately 1%, in line with company guidance.
Full year net cash provided by operating activities was $1,701 million. After capital expenditures of $553 million, cash flow, defined as net cash provided by operating activities less capital expenditure, was $1,148 million. This result was in line with company guidance.
Fourth Quarter and Full Year 2021 Kellogg North America Performance
Amidst the persisting pandemic, Kellogg Company in 2021 remained focused on employee safety, food supply, and giving back to its communities. Continuing to execute against its Deploy for Growth strategy, the company was able to execute through numerous supply disruptions and high cost inflation, and delivered on its twice-raised financial guidance for the full year.
The company continued to face an unusually challenging business environment in the fourth quarter marked by a resurgence of COVID-19, persistent worldwide bottlenecks and shortages, and accelerating cost inflation. Its results were also negatively impacted by the strike of approximately 1,400 union employees at the company's four U.S. cereal plants, which began in early October and ended in late December. While working through these challenging supply conditions, the company also continued to largely offset marketdriven cost inflation with productivity and revenue growth management efforts, while sustaining strong momentum in its international regions, and in its North America snacks business.
Kellogg North America's reported net sales in the fourth quarter decreased by approximately 3%, reflecting the negative impact of supply disruptions, notably the 12-week labor strike, and the lapping of an extra shipping week in the year-earlier quarter partially offset by strong price/mix growth, momentum in snacks, and a recovery in away-from-home channels. On an organic basis, net sales improved by 4%. Kellogg North America's reported operating profit declined by 20%, reflecting high cost inflation, economy-wide bottlenecks and shortages, the labor strike, and the lapping of an extra shipping week in the year-ago quarter. On an adjusted and currency-neutral adjusted basis, operating profit decreased by 19%.
For the full year, Kellogg North America's reported net sales declined by 2% due to the negative impact of supply disruptions, notably the 12-week labor strike and earlier fire, as well as the lapping of the prior fiscal year’s 53rd week, partially offset by strong price/mix growth, momentum in snacks, and a recovery in away-from-home channels. On an organic basis, net sales decreased by 1%. Kellogg North America's reported operating profit decreased 10% reflecting high cost inflation, economy-wide bottlenecks and shortages, the labor strike, the lapping of an extra shipping week in the year-ago quarter, and higher restructuring charges. On an adjusted and currency-neutral adjusted basis, operating profit declined 9%.
