(Reuters) - Kellogg Co (NYS:K), the world's largest maker of breakfast cereals, said it would cut about 7 percent of its workforce and slash capacity by 2017, after reporting another quarterly decline in sales in its cereals business.
Shares of the maker of Corn Flakes, Chocos cereal and Eggo waffles rose 2 percent in early trading on the New York Stock Exchange.
Kellogg reported a better-than-expected adjusted profit for the third quarter ended September 28, helped by cost cuts.
The company's cereals business, which sells Corn Flakes, Chocos and Eggo Waffles, has been battling stiff competition from General Mills Inc (NYS:GIS) and private-label cereal brands. Increasing popularity of yoghurt, frozen egg sandwiches and other breakfast items has also hit the business.
Sales at Kellogg's U.S. morning foods business, which includes cereals, fell 2.2 percent in the third quarter.
The job cuts are a part of a new four-year cost-cutting program called Project K to strengthen existing businesses in its core markets and increase growth in developing markets. Kellogg had about 31,000 employees globally at the end of 2012.
Project K, which includes eliminating excess capacity and consolidating supply chain infrastructure, is expected to result in pre-tax charges of $1.2 billion-$1.4 billion, the company said.
Kellogg forecast full-year adjusted earnings at the low end of its previous estimate of $3.75-$3.84 per share, citing weaker-than-expected sales in certain food categories.
Analysts on average were expecting $3.77, according to Thomson Reuters I/B/E/S.
The company cut its 2013 revenue growth forecast to 4-5 percent from 5 percent.
Net income rose to $326 million, or 90 cents per share, in the third quarter from $318 million, or 89 cents per share, a year earlier.
Excluding certain integration costs and expenses related to Project K, Kellogg earned 95 cents per share. Analysts on average had expected 89 cents.
The company, which also makes Keebler cookies, said revenue was flat at $3.72 billion, in line with Wall Street estimates.
Kellogg shares were trading at $63.50 just after the opening.
(Reporting by Siddharth Cavale and Aditi Shrivastava in Bangalore; Editing by Kirti Pandey)