Kellogg cites supply chain costs in reporting third-quarter net income drop

Snack manufacturer Kellogg Co. recently attributed its 14 percent decline in third-quarter net income partially to higher incentive compensation and supply chain costs, according to The Associated Press.

Kellogg, which like other food manufacturers has raised prices over recent quarters to help offset elevated prices for fuel and ingredients, also reportedly lowered its earnings guidance, while shares dropped 7 percent during premarket trading.

Specifically, the company pointed to costs associated with efforts to improve its supply chain as hurting the net income by 8 percentage points. John Bryant, the chief executive officer of the cereal maker, noted that such upgrades would likely take a number of years, but would "improve the infrastructure and drive reliability and capability" of Kellogg.

In North America, revenue increased 4 percent during the quarter, but sales of the cereal came up flat, according to the news source. Internationally, revenue jumped 7 percent, with Latin America particularly strong.

Reuters reports Kellogg said it plans to spend an extra $70 million during the second half of 2011 in order to improve manufacturing.