Internal Analysis Project
Kellogg’s is a food manufacturing company whose principal products are ready-to-eat cereals and convenience foods, such as cookies, crackers, toaster pastries, cereal bars, fruit snacks, frozen waffles and veggie foods. These products are manufactured in 18 countries and marketed in more than 180 countries. The cereal products are generally marketed under the Kellogg’s name and are sold principally to the grocery trade through direct sales forces for resale to consumers. (Kellogg's, 2010)
In this report I will primarily be looking at Kellogg companies financial reports for the last five years. I'll be analysing the trends survey predictions can be made the future. These predictions will allow the company to create strategies on how to bring the company forward in the future.
Net sales show the amount of sales generated by company after the deductions of returns, allowances are damaged or missing goods and any discounts allowed. (Investopedia)
Net Sales ($ Millions)
| (Kellogg's, 2010)
Kellogg Company has shown steady growth in net sales from the year 2005 to 2008, reaching a peak of just under $13 billion. In 2009 financial year the company suffered a slight dip, but was to be expected with the financial crisis. With the exception of this slight dip, I would expect the growth of Kellogg Company to carry on from the next financial year along a similar trajectory that was experienced between 2005 2008.
Operating profit or Earnings before Interest and Tax (EBIT) is the profit from a firm's core business operations. It does not include profit from a firm’s investment or the effects of interest and taxes. (Investopedia)
Operating Profit (millions)
| (Kellogg's, 2010)
As you can see from the data Kellogg's company operating profit has experienced massive growth over the last five years, increasing by over $250 million. Whilst growth slowed down in the year 2009, it still grew. Extrapolating a future trend, I'd expect operating profit to continue growing in a similar pattern to the years 2006 to 2008.
Stock turnover is the measurement used to show the number of times stock is used or sold within the given timeframe, in this case one year. A low turnover rate might indicate overstocking, obsolescence or deficiencies in the product line or marketing strategy. [ (Investopedia) ]
[ (Kellogg's, 2010) ]
Whilst the diagram does show quite variation stock turnover, I feel that this is more due to how closely we are looking at the figures in the diagram. If you look at the table, you can see that stock turnover variation isn't really that big at all. Kellogg's have a normal and fairly steady rate of turnover. By increasing their stock turnover, Kellogg's will be reducing holding prices. By doing this they will increase in net profit and profitability, as long as net income remains constant. Return on Invested Capital
A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. The return on invested capital measure gives a sense of how well a company is using its money to generate returns. (Investopedia)
As you can see from the diagram, the ROIC has increased by 4.7% over the last 5 years. This means that the capital which has been invested in the firm is bringing back bigger and bigger returns. This is a good sign for investors who will be interested in seeing healthy returns on their money.
Diluted Earnings per Share
Diluted earnings per...
Bibliography: Investopedia. (n.d.). Investopedia Net Sales. Retrieved October 10, 2001, from investopedia.com: www.investopedia.com/terms/n/netsales.asp
Kellogg 's. (2010). Kelloggs Company 2009 Annual Report. Michigan: Kellogg Company.
Wiki Invest. (n.d.). wikinvest.com. Retrieved October 12, 2010, from Wili Invest: www.wikinvest.com/stock/kellogg_company_(k)
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