Kellogg’s Rivals Crunch Its Profit

Kellogg Co. said Friday that fourth-quarter earnings fell 2.8% amid competition from rival cereal makers, and warned 1998 profit will be trimmed by the effect of a strong dollar against foreign currencies.

The world’s largest maker of cereals said earnings before charges fell to $158.5 million, or 39 cents a diluted share, from $163.1 million, or 39 cents, a year ago. It was expected to earn 40 cents a diluted share, according to IBES International Inc.

Profit fell as the maker of Frosted Flakes and Rice Krispies faced growing competition from supermarket brands and Quaker Oats Co.’s less expensive bagged cereals.

Kellogg has also said 1998 earnings will fall short of its goal of double-digit growth because of several factors, especially the effect of currency fluctuations on its foreign operations.

“They’re going to face the head wind of a stronger dollar,” said Merrill Lynch & Co. analyst Eric Katzman.

A strong dollar, which reduces the value of revenue in foreign markets, will cut annual earnings by about 5 cents a share, Katzman said.

Kellogg’s shares fell $2.38 to close at $46.38 on the New York Stock Exchange.

Meanwhile, Ralston Purina Co. said fiscal first-quarter profit jumped 20%, more than expected, on higher sales of pet food and batteries.

Profit from continuing operations in the quarter ended Dec. 31 rose to $137 million, or $1.24 a diluted share, from $114.3 million, or $1.02, a year ago.

Powering the profit were higher sales of longer-lasting batteries, and greater worldwide volume sales of pet food coupled with lower costs for ingredients. The earnings beat the $1.21-a-share average estimate of three analysts.

Shares of the St. Louis company surged $4.88 to close at $93.88 on the NYSE.