“There is no question that today’s business environment is as challenging as we’ve ever seen it,” as market prices for commodities, packaging and freight surge, economy-wide bottlenecks and shortages hamper production, and acute labor shortages – including a month-long labor strike at US cereal facilities – result in absenteeism, high turnover and difficulty maintaining production, CEO Steven Cahillane told investors Thursday during the company’s third quarter earnings call.
But, he added, “we’re taking important actions to manage through today’s unprecedented environment and through it all we’re executive well in the market and delivering balanced financial growth, which continued in quarter three” with a 6% increase in net sales led by international momentum and positive price/mix.
Operating profit also was up 9% in the quarter year-over-year – helping the company confidently reaffirm its full-year guidance for operating profits and earnings per share despite a worsening cost, labor and supply environment, Cahillane said.
‘Quarter four will be a little different’
While the company maintained its full-year expectations, CFO Amit Banati cautioned, “quarter four will be a little different, contrary to our prior assumptions.”
He explained: “We are seeing no moderation of the economy-wide bottlenecks and shortages in the fourth quarter. In fact, we’re now experiencing incremental disruption and costs further compounded by a labor strike. So, for quarter four, we are forecasting gross profit dollars and operating profit dollars to be below quarter four of 2019 – even if both metrics finish the full year above 2019 levels.”