Kellogg: Reorientation – Make three out of one! Capital analysis (Bank Vontobel Europe AG)

Munich (www.aktiencheck.de) – Kellogg Stock Analysis by Bank Vontobel Europe AG:

For strategic reasons, some corporations choose to separate certain areas of the company from their core activities; Kellogg (ISIN: US4878361082, WKN: 853265, ticker symbol: KEL, ticker symbol NYSE: K), known for its breakfast cereals, recently announced plans to transform its existing business into three new independent companies, according to Vontobel Europe AG Bank in a recent publication.

The goal of transformation is to create agile and focused companies so that they can reach their full potential.

Kellogg’s history begins over 100 years ago. While looking for an alternative to hard and bland bread at the sanatorium work, the two Kellogg brothers developed new wheat flakes, which henceforth will be referred to as corn flakes. Eventually, in 1906, one of the brothers founded a company known as Kellogg. At that time, the demand significantly exceeded the supply and required additional production capacity. Soon after, other products and the first steps abroad appeared.

Meanwhile, Kellogg has become a major food producer. The group is constantly expanding its product portfolio and operates mainly in the breakfast and snack industry. In the past fiscal year (2021), Kellogg had sales of $ 14.81 billion and a net profit of nearly $ 1.5 billion.

In addition to developing new proprietary products, Kellogg continued to expand its product portfolio through acquisitions. For example, in 2012, the potato chip manufacturer “Pringles” was acquired for nearly $ 2.7 billion. The acquisition almost tripled sales in the international snack food business, strengthening the company’s position in the international snack food business. In 2017, RXBAR, a nutritional bar maker, was acquired for $ 600 million.

A few days ago (June 21, 2022), Kellogg unexpectedly announced that it would initiate a portfolio transformation by carving out two business areas. Three independent companies would be listed on the stock exchange after the corporate share.

The new names of the spin-offs have yet to be determined, but they will be presented with transition names in the press release. Business unit “Global Snacking Co.” should focus on the international snack, cereal and pasta markets, including the frozen breakfast segment in North America. According to the company, this business unit reported sales of $ 11.4 billion last year and profit before interest, taxes, depreciation and amortization (EBITDA) was $ 2 billion. Kellogg’s CEO Steve Cahillane will take over as CEO of this unit.

The second of the three divisions, “North America Cereal Co.”, focuses on the North American market. and they offer grains in the US, Canada and the Caribbean. The area generated $ 2.4 billion in group sales and $ 250 million in EBITDA last year. The main goal was to restore margins and market shares, which were affected by supply bottlenecks in 2021. In the long term, it is promised to increase margins and a better return on invested capital.

The third business unit “Plant Co.” it is much smaller. This applies to plant-based foods and focuses on North American end markets. Last year, the Plant Co. contributed 340 million to group sales and 50 million to EBITDA. Above all, business in North America needs to be further developed before international expansion in the near future.

After a successful capital measurement, Global Snacking will be the largest of the three start-ups with a sales share of almost 77 percent. North America Cereal accounts for 16 percent of sales, and Plant Co. nearly 2 percent of sales.

CEO Steve Cahillane justifies the adjustment to business development over the past few years. Kellogg opened up new geographic markets and focused on growing businesses, especially in the snack industry. The market position in emerging markets was strengthened through acquisitions and partnerships, and the snack business was strengthened through acquisitions and divestitures. Based on the successful implementation of these initiatives, the Group believes it is appropriate to continue individual business units as independent companies to pursue their own strategic priorities.

Kellogg’s shareholders were to receive shares in the newly formed North America Cereal Co. and Plant Co. As is currently the case (June 2022), both spin-offs should end by the end of 2023.

This is not the first such division in the food sector. Also in the USA, “Kraft Foods” split into two listed companies in 2011: Mondelez International and Kraft Foods (ISIN US5007541064 / WKN A14TU4). Mondelez is positioned in the snack food industry and generated sales of nearly $ 29 billion in 2021. On the other hand, Kraft Foods is a food company and was merged with “Heinz” in 2015 to form the “Kraft Heinz Company”.

Competition seems to be more and more intense in the candy bar market especially. Mondelez announced last week (week 25, 2022) the acquisition of energy bar maker “Clif Bar & Co.” announced for at least $ 2.9 billion. Thanks to “KIND”, the private company “Mars Incorporated” added another manufacturer of bars to its portfolio. Kellogg is also active in this segment with RXBAR and will have to join other large corporations.

Kellogg intends to split into three new companies. The international snack food business is the largest by sales and has seen strong growth in the past. According to Bank Vontobel Europe AG, as a result of the spin-off, the North American grain business and plant division should be able to better utilize their resources and better deliver on their priorities. (Analysis on 07/05/2022)

Please also read the information on the information obligation in the event of a conflict of interest within the meaning of Directive 2014/57 / EU and relevant EU regulations at the link below.

Kellogg Stock Exchanges:

Tradegate Share Price Kellogg Shares:
EUR 69.96 + 2.27% (May 7, 2022, 15:39)

NYSE Stock Price Kellogg Shares:
$ 71.89 + 0.15% (05/07/2022, 15:34)

Kellogg ISIN Code:
US4878361082

WKN Kellogg Magazine:
853265

Kellogg Stock Bar Symbol:
KEL

Symbol of the NYSE Kellogg Shares:
K.

Kellogg’s short profile:

Kellogg (ISIN: US4878361082, WKN: 853265, ticker symbol: KEL, NYSE symbol: K) is a leading manufacturer of ready-to-eat cereals and other prepared foods. The most famous brands are Kellogg’s corn flakes and Pringles chips. The company’s range also includes various cereals that are refined with various ingredients such as cinnamon, raisins, honey or in various forms under the brands Kellogg’s All-Bran, Kellogg’s Cinnamon Crunch Crispies, Kellogg’s Corn Pops, Kellogg’s Fruit Loops and many more. offered. The company also offers ready-made waffles under the Kellogg’s Eggo, Pop-Tarts Toasties, a mix of spices for the preparation of various dishes under the Loma Linda brand and other products under the Natural Touch, Morningstar brands (including vegetarian burgers) or Worthington Foods (vegetarian meat). and fish substitutes). The finished products are sold under the brands Keebler, Cheez-it, EL Fudge, Famous Amos, Ready Chrust, Chips Deluxe and many others. (05.07.2022 / ac / a / n)

Disclosing Potential Conflicts of Interest:

You can view possible conflicts of interest on the creator / analysis sources page.

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