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Kellogg beats profit estimate; extends 'Project K' restructuring
February 9, 2017 / 3:59 PM / 7 months ago

Kellogg beats profit estimate; extends 'Project K' restructuring

FILE PHOTO - Kellogg's Corn Flakes cereal is pictured at a Ralphs grocery store in Pasadena, California August 3, 2015. REUTERS/Mario Anzuoni/File Photo

(Reuters) - Kellogg Co, the world’s largest maker of breakfast cereals, reported a higher-than-expected adjusted quarterly profit and extended its “Project K” restructuring program by another year.

The program, launched in 2013, is now expected to save the company $600-$700 million through 2019, the company said.

Investors cheered the announcement, pushing the stock up 3.7 percent to $76.21 in morning trading on Thursday.

The “Project K” restructuring program, initially estimated to run through 2018 and help save $425-$475 million annually, was launched to counter declining sales as more Americans shunned processed foods in favor of healthier options.

Kellogg's cereal is shown on display during a preview of a new Walmart Super Center prior to its opening in Compton, California, U.S., January 10, 2017. REUTERS/Mike Blake/Files

The program involves jobcuts and production optimization among other things. To cut costs further, the company said on Wednesday it would switch to a warehouse delivery model for its U.S. snacks business and stop distributing products directly to stores.

Kellogg’s selling, general and administrative expenses fell more than 12 percent to $878 million in the quarter. The company posted an operating profit of $98 million, compared with a loss of $39 million a year earlier.

Excluding charges related to its Venezuelan business and Project K, the company earned 92 cents per share, beating analysts’ average estimate of 85 cents, according to Thomson Reuters I/B/E/S.

The company’s overall net sales fell slightly to $3.1 billion, edging past the average analyst estimate of $3.08 billion, according to Thomson Reuters I/B/E/S.

Kellogg forecast 2017 adjusted earnings per share of $3.91-$3.97, largely below the estimate of $3.97.

Reporting by Gayathree Ganesan in Bengaluru; Editing by Shounak Dasgupta and Saumyadeb Chakrabarty

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