Kellogg Profit Warning Hits Share Price

Breakfast cereal group Kellogg has today issued a profit warning for 2007 and 2008 in light of rising global wheat prices which it expects to impact upon the profitability of its business over the period, resulting in share prices plummeting by almost 5% on the day.

The world’s most prominent cereal brand, behind products such as Corn Flakes, Coco Pops, Frosties and Rice Krispies, announced today that rising demand for wheat at raw material stage would have an adverse effect on its profit figures for the year end, with a greater likelihood of hindered profitability into next year.

As a result it warned today that previous expectations of earnings of around $2.75 per share were now unrealistic, and analysts should expect somewhere in the region of $2.72, sending share prices tumbling.

The news came directly off the back of an increase of around 8.5% in profits for the third quarter, despite the rising costs it said would ultimately have an effect over the short term year end profitability.

Sales for the period were also up by over 6% to in excess of $3 billion as a result of growing demand for its produce worldwide, auguring well for foreseeable future in spite of the warnings delivered by the company today.

Wheat prices across the world have soared in recent months as a result of a lower than average summer crop, stemming from more severe weather patterns across the main crop growing regions and bad weather generally destroying growth.

Simultaneously demand for wheat and wheat based products in China and India have skyrocketed, far higher that the mirrored reflectional loss in supply side, resulting in the price of wheat significantly increasing.

The company expects to realise profitability of $2.92 over the course of 2008, down from previous expectations as a direct result of the rising wheat costs.

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