(Reuters) – Kellogg Co on Thursday warned of a potential hit to full-year earnings from a prolonged strike at its cereal plants in the United States and a global supply chain crunch, even as the packaged foods maker raised its forecast for organic net sales.
About 1,400 of Kellogg’s cereal plant employees have been on strike since early October, demanding revised contracts.
Kellogg said on Wednesday its cereal plant workers union had rejected a revised offer, which the U.S. packaged foods maker called its “last best final offer,” prolonging the months-long negotiations over a new contract.
Chief Executive Officer Steve Cahillane said in the earnings statement on Thursday the company was working well in an “extremely difficult operating environment, marked by economy-wide bottlenecks and shortages and high cost inflation,” but warned of more challenges in the coming months.
“These business conditions do not get any easier in the fourth quarter, especially with the added challenge of a current labor disruption,” Cahillane said.
The company, like its peers Kraft Heinz and Conagra Brands, has been wrestling with rising freight expenses and costs of raw materials.
Kellogg now expects organic net sales growth for fiscal 2021, excluding the impact of the strike, to be between 2% and 3%, up from its prior forecast of 0% to 1% growth. But it said its adjusted profit growth could be at the low end of its range of 1% to 2% due to current supply and labor challenges.
Credit Suisse analyst Robert Moskow said its profit outlook “might get worse if strike drags on.”
Net sales for the Froot Loops maker rose to $3.62 billion in the third quarter ended Oct. 2, from $3.43 billion a year earlier. Analysts on average had expected sales of $3.54 billion, according to Refinitiv IBES.
Excluding items, Kellogg earned $1.09 per share, topping estimates of profit of 93 cents per share.
(Reporting by Deborah Sophia and Praveen Paramasivam in Bengaluru; Editing by Maju Samuel and Arpan Varghese)
