Kellogg Company K is set to be separated into two independent, publicly traded companies, as unveiled before. The company revealed that management has given the official approval for Kellogg Company’s separation into Kellanova and WK Kellogg Co., which is likely to take effect on Oct 2, 2023.
While Kellogg Company will be rechristened as Kellanova and trade under its present symbol “K”, WK Kellogg Co is anticipated to start trading on the NYSE as "KLG". The company’s stockholders, as of Sep 21, will be entitled to receive one WK Kellogg Co share for every four shares owned by Kellogg Company.
Management expects the separation to result in two stronger entities, which is likely to generate considerable shareholder value.
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Kellanova and WK Kellogg in Detail
Kellanova’s portfolio will be more focused on snacks and emerging markets, including differentiated brands with a robust scope for expansion. Management earlier informed that Kellanova would flaunt a portfolio of renowned snacking brands like Pringles, Pop-Tarts, Cheez-It, Rice Krispies Treats, RXBAR, MorningStar Farms and Eggo, among others. It will also house some international cereal brands, such as Kellogg's, Frosties, Special K, Zucaritas, Crunchy Nut, Corn Flakes, Nutri-Grain and others.
Kellanova’s net sales are anticipated to be roughly $13.4 to 13.6 billion in 2024, with adjusted EBITDA projected in the range of about $2.25-2.3 billion. Kellanova unveiled its long-term annual growth rates, which include 3-5% for organic net sales, 5-7% for the adjusted operating profit (on a currency-neutral basis) and 7-9% for adjusted earnings per share (on a currency-neutral basis).
With a dominant market position in North American cereal, WK Kellogg Co will concentrate on enhancing its business execution and modernizing its supply chain. This is likely to yield better competitiveness, profitability and cash flow. WK Kellogg Co. will house a portfolio of leading brands like Kellogg's, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi and Bear Naked.
The company envisions 2024 net sales of about $2.7 billion and an adjusted EBITDA in the band of roughly $255-265 million. In the upcoming three years, WK Kellogg Co anticipates achieving a 500-basis point improvement in its adjusted EBITDA margins by 2026-end. This is likely to be driven by the modernization of the supply chain and a consistent revenue performance.
Kellogg has been benefiting from its revenue growth management efforts. Robust brands have been working well for the company. A favorable price/mix and solid momentum in snacks boosted sales in the second quarter of 2023, wherein the company raised its sales and operating profit guidance for 2023. However, high SG&A costs have been a concern.
Kellogg currently carries a Zacks Rank #3 (Hold). The company’s shares have tumbled 13.6% year to date compared with the industry’s decline of 8.4%.
With the planned spin-off, Kellanova and WK Kellogg Co will be able to better allocate their resources toward distinct strategic goals with increased operational flexibility, allowing them to have a considerable standalone scope and create greater shareholder value.
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