WK Kellogg forecast annual profit above expectations on Tuesday and reported better-than-expected earnings as the breakfast cereal maker’s efforts clamp down on costs boosted its margins.
Share of the company – which makes Froot Loops and Frosties cereals – rose about 4% in premarket trading.
The Michigan-based company had announced a reorganisation plan in August which involved plant closures, workforce reduction and plans to streamline its supply chain by investing in modernising its equipment and infrastructure.
The cost-cutting effort helped the company post an adjusted profit of 42 cents per share for the fourth quarter ended 28 December, and beat analysts’ estimates of 26 cents per share, according to data compiled by the London Stock Exchange Group.
WK Kellogg expects full-year net adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) between $286 million and $292 million, compared with analysts’ estimate of $283.2 million.
The company has also had to raise prices to offset higher raw material costs, which have in turn led to budget-strained customers cutting back on spending on packaged food such as cereal.
The cereal-maker’s product pricing rose 3.8% in the quarter, while volume slumped 5.6%.
The higher prices helped the company’s margins rise to 8.9%.
WK Kellogg’s net sales fell 1.8% to $640 million in the quarter, compared with analysts’ average expectation of $641.7 million.
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