Cheez-It Maker's Q2 Profit Crumbles: Sales Beat, But Merger Clouds Outlook

Kellanova (NYSE:K) reported second-quarter adjusted earnings per share of 94 cents, missing the analyst consensus estimate of $1.

Powered by brands including Pringles, Cheez-It, Pop-Tarts, Kellogg’s Rice Krispies, and more, Kellanova’s quarterly sales of $3.203 billion (down 0.3% year over year) outpaced the Street view of $3.197 billion.

North America’s reported and organic net sales decreased by 4% during the second quarter, as volume declined amidst prolonged softness in snacking and frozen categories.

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Europe’s reported net sales increased 2% year-over-year in the second quarter, as positive foreign currency translation and improved price/mix more than offset a decline in volume related to prolonged demand softness in the snacks and cereal categories, as well as disruptions to orders from specific large customers.

Reported operating profit in the second quarter decreased by 11% year-on-year due to a negative swing in mark-to-market impacts and the profit impact of lower net sales outside Africa.

On an adjusted basis, which excludes mark-to-market impacts and one-time charges, operating profit decreased by 5%.

Adjusted gross profit in the quarter under review totaled $1.114 billion, lower than $1.164 billion a year ago. Adjusted gross margin contracted to 34.8% from 36.5% a year ago. Adjusted operating margin contracted to 14.9% from 15.7%.

The company exited the quarter with cash and equivalents worth $354 million.

On August 14, 2024, Mars, Incorporated announced a definitive agreement to acquire Kellanova for $83.50 per share in cash. Shareholders approved the deal on November 1, 2024, and the transaction is expected to close by the end of 2025, pending regulatory approvals and customary conditions.

Due to the pending merger with Mars, Kellanova will not be providing forward-looking guidance.

Price Action: K shares are trading higher by 0.19% to $79.97 at last check on Thursday.

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