Milling & Baking News - May 9, 2006 - 11

F I N A N C I A L

R E S U L T S

Kellogg to offer organic versions
of popular cereals; earnings up
Continued from Page 1
recent years continued through the first
quarter," said Jim Jenness, chairman
and chief executive officer. "We exceeded our growth targets, made significant
investment in our businesses, and overcame continued cost pressures. These
results again demonstrate the strength
and flexibility of our business model."
Net sales at Kellogg North America
grew 9% to $1,865.1 million during
the quarter, up from $1.715.8 million
in the same period a year ago.
Kellogg said its North America Retail Cereal unit posted a 6% increase
in internal sales, driven by innovation
introduced in recent months and effective brand-building initiatives.
Commenting in an April 27 conference call, David Mackay, president and
chief operating officer, said the company's implementation of the Special
K two-week challenge helped spur a
double-digit sales growth rate in the
quarter. Kellogg has more innovation
planned for late in the second quarter, he said, including new versions of
Eggo, Crunch and Swirls. Kellogg also
will launch three new organic versions of Mini-Wheats, Rice Krispies
and Raisin Bran, which Mr. Mackay
said makes the company "the first major manufacturer to introduce organic

versions of its favorite brands."
While it's too early to gauge what
impact the organic products will have
for Kellogg, Mr. Jenness said the decision to extend into the organic market
"makes sense."
The North America Retail Snacks
business also posted good results, as
internal sales grew 12% behind growth

in cookies, crackers, wholesome
snacks and toaster pastries. In cookies,
Kellogg continues to make headway
in a once stagnant category, increasing
its share of the cookie market by 8.5
points in the quarter, buoyed by the
introduction of two varieties of Chips
Deluxe, new Fudge Shoppe and Murray Sugar Free cookies. Mr. Jenness
attributed the improvement to getting
innovation lined up with core brands,
as well as "outstanding execution" of
its direct-store delivery system.
In wholesome snacks, sales grew
at a double-digit rate in the quarter
while category share increased 1.1

Bimbo U.S. sales climb nearly 8%
behind product launches
MEXICO CITY - Recently launched
products such as Oroweat Honey
Fiber Whole Grain and Mrs Baird's
Whole Grain White Bread helped
grow volumes for Oroweat and Mrs
Baird's brands in the first quarter
ended March 31, Grupo Bimbo S.A. de
C.V. reported April 26.
U.S. sales for Grupo Bimbo S.A. de
C.V. reached NP$3,699 million ($331
million) for the first quarter, which
marked a 7.7% increase from NP$3,433
($309 million) in the previous year 's
first quarter. The U.S. operating income of NP$42 million compared with
an operating loss of NP$35 million
in the previous year 's first quarter.
Mexican brands in the United States
performed well thanks to geographic
expansion and an increase in routes.
The increase in U.S. operating income came despite rising costs for
packaging, flour, sweeteners and energy in the U.S. operations, said Dan12 / Milling & Baking News, May 9, 2006

iel Servitje, chief executive officer of
Grupo Bimbo S.A. de C.V., in an April
27 earnings conference call.
"Sales growth in the U.S. generated
some economies of scale in terms of

Grupo Bimbo 1Q sales
(in NP millions)
Mexico
United States
Latin America

1Q, 2006
NP$10,336
NP$3,699
NP$1,109

1Q, 2005
NP$9,608
NP$3,433
NP$965

Source: Grupo Bimbo S.A. de C.V.

fixed costs, which more than compensated for the higher raw materials
and energy prices as well as the expansion of the distribution network,"
Mr. Servitje said.
Companywide, Grupo Bimbo S.A.
de C.V. reported net majority income
of NP$658 million, nearly a 14% increase from NP$579 million in the pre-

points. Fruit snacks performed well
in the quarter, as did Munch'Ems Granola Snacks and Special K bars.
"The results for (Special K bars) have
been exceptional," Mr. Mackay said. "We
supported the brand in the first quarter
with strong on-air ads and the introduction of new Special K Snack Bites, which
have been incredibly well received.
We're introducing new Crunchy Nut
Sweet and Salty Bars in peanut and almond varieties and Smart Start bars both
late in the second quarter."
North America Frozen and Specialty Channels posted internal net
sales growth of 5% as the company's
food-away-from-home and frozen
foods businesses contributed strong
sales gains. In the second half of the
year, Mr. Mackay said Kellogg intends
to enter for the first time the wider
frozen main meal category with the
extension of its Kashi brand into the
frozen entrée category.
At Kellogg International, net sales
grew approximately 1%, or 5% excluding the effect of currency translation.
Looking forward, Kellogg said it
now expects full-year earnings to be in
a range of $2.45 to $2.49 per share, up
from $2.43 to $2.48. The higher earnings range includes approximately 15c
of up-front costs and an increased estimate for stock option costs of 10c per
share for the full year. The previous
projection had been for these costs to
equal 9c per share. MBN

vious year 's first quarter. Sales grew
8% to NP$14,776 million. In Mexico,
the company reported operating income of NP$970 million, close to a 3%
drop, and sales of NP$10,336 million,
nearly an 8% increase.
Mr. Servitje said Grupo Bimbo S.A.
de C.V. has undertaken a program
that encompasses 27 initiatives on
the health and wellness front. The
program includes the complete elimination of trans fat from the company's product portfolio and increasing iron, zinc and folic acid content
in the Mexican product line. Grupo
Bimbo S.A. de C.V. also will launch
new portion sizes for different sales
channels and extend its nutritional
education campaign.
Internationally, Grupo Bimbo S.A.
de C.V. recently acquired Spain's Panrico Food subsidiary in Beijing.
"We're taking a cautious approach
(in China) but also believe that Bimbo, as a leading global baking company, needs to understand and gain
a foothold in this vital market,"
Mr. Servitje said. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - May 9, 2006

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