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Defective pack recall costs Kellogg's as Q2 profits tumble 15%

A massive recall of defective cereal packaging and weak UK sales have pushed cereal maker Kellogg's profit to tumble in the second quarter of the year.

In second-quarter results published this week, US-based Kellogg Company revealed that its net profits fell 15% to $302m (£192m) compared to the same period last year.

Two of the key factors behind the drop, the company said, were weak cereal sales in markets including the UK and the recall of 28m packs of cereals from US supermarkets at the end of June.

The recall took place after high levels of the chemical methylnaphthalene in the inner bags of packs of Apple Jacks, Corn Pops, Froot Loops and Honey Smacks were reported to have given the bags an abnormal smell and made the cereal taste off.

However, at the time of the recall, Kellogg insisted that the potential for health problems arising from the presence of the substance was small.

Weak European sales

Global sales held up better, boosted by growth in Asia and Latin America, but were still down 1% at $3.06bn.

Kellogg Company chief executive officer David Mackay said: "Our second quarter results reflect the deflationary environment in the cereal category, particularly in the US and UK, softer Eggo [waffles] sales, and the voluntary cereal recall.

"The second quarter was weaker than expected, and we have lowered our full-year guidance to reflect the cost of the recall and the difficult business environment."