CHICAGO — Kellanova posted mixed results for its fiscal 2025 first quarter but said the company is currently focusing on navigating a volatile global economic climate as its acquisition by Mars Inc. moves toward completion.
For the quarter ended March 29, net income climbed 14% to $304 million, equal to 87¢ per share on the common stock, from $267 million, or 78¢ per share, a year earlier. Kellanova attributed the 11.5% earnings-per-share growth to the cycling of prior-year restructuring charges and a lower effective tax rate.
Excluding merger and separation costs and other items, adjusted diluted net EPS declined 10.9% to 90¢ (down 7.9% to 93¢ on a currency-neutral basis) from $1.01 per share a year ago. That fell short Wall Street’s consensus estimate of $1.01.
Kellanova provided no update on the $35.9 billion deal to be acquired by Mars, other than reaffirming the transaction is still expected to close within the 2025 first half, pending customary closing conditions and regulatory approvals. Under the agreement, unveiled in mid-August, Mars is slated to buy Kellanova for $83.50 per share in cash. Kellanova shareholders approved the deal in a special meeting on Nov. 1. Plans call for Kellanova to be integrated into Mars Snacking, led by global president Andrew Clarke, and remain in its Chicago headquarters.
“Our organization demonstrated focus and determination in managing through what is undeniably an uncertain macroeconomic and industry environment,” said Steve Cahillane, chairman, president and chief executive officer of Kellanova. “We delivered against our budget in the quarter, led by our emerging markets, and we are encouraged by our improvement in category share performance in key markets around the world.”
Since the Mars acquisition was announced, Kellanova hasn’t provided forward-looking guidance or held its quarterly analyst call. But since Kellanova’s previous quarterly report, the Trump administration has rolled out — and paused or postponed — a range of tariffs, including levies on major trading partners Canada, Mexico and China as well as universal and reciprocal tariffs on dozens of nations. Economists say the tariffs threaten to hike costs for businesses and consumers as well as snarl global supply chains and stunt US and global economic growth.
Kellanova’s first-quarter operating income grew 9.3% year over year to $430 million from $393 million. But on an adjusted basis, operating profit fell 13.1% to $441 million from $508 million and was down 10.5% to $454 million in constant currency.
“We are planning contingencies and taking action for managing through continued global economic uncertainty, even as we prepare for our next chapter as part of a global snacking powerhouse with Mars,” Cahillane said.
First-quarter net sales decreased 3.6% to $3.08 billion from $3.2 billion a year earlier. Kellanova said negative foreign currency translation more than offset the net impact of increased price/mix and lower volume. Organic net sales, excluding the impact of foreign exchange, inched up 0.7% on a 3.2% gain in price/mix and a 2.5% decline in volume.
Kellanova said a further softening of snacking and frozen categories contributed to lower first-quarter volume in North America. Source: DAVSLENS PHOTOGRAPHY - STOCK.ADOBE.COM
Kellanova said a further softening of snacking and frozen categories contributed to lower first-quarter volume in North America.
“Kellanova in the first quarter sustained growth in organic net sales, in line with its internal projection,” the company said. “This growth was led by emerging markets and was delivered in spite of prolonged category-wide softness, particularly in developed markets. As expected, profit and profit margins were pressured in the quarter by higher costs and adverse business mix, and the company delivered against its internal projections for adjusted operating profit and earnings per share.”
In North America, net sales fell 4.1% to $1.62 billion from $1.69 billion in the prior-year period. Organic net sales, on a currency-neutral basis, declined 3.8% on decreases of 0.9% in price/mix and 2.9% in volume. Kellanova cited a “further softening of snacking and frozen categories” as contributing to lower volume in the region. Operating income dropped 9% to $305 million and was down 18% to $310 million on an adjusted basis.
“North America’s reported operating profit in the quarter decreased by 9% year on year, reflecting primarily the net sales decline and related negative operating leverage, partially offset by lapping up front charges for network optimization and separation costs in the year-ago quarter,” according to Kellanova. “On an adjusted and currency-neutral adjusted basis, operating profit decreased by 18%.”
By category in North America, first-quarter snack sales in fell 5% year over year and were down 4.8% organically, Kellanova said. Frozen food sales edged up 0.3% and rose 0.7% on an organic basis.
In addition to snacks, Kellanova’s international product categories include cereal (Europe, Latin America and Asia-Pacific/Middle East/Africa) and noodles/other (AMEA). Organic net sales rose 3.6% in Latin America for snacks, 1.7% in Europe and 2.3% in AMEA for cereal, and 52.2% in AMEA for noodles/other. On an organic basis, net sales declined 4.8% in Europe and 6.9% in AMEA for snacks and were down 3.9% in Latin America for cereal.
