Kellogg’s directs more than €1.1bn of sales through Irish unit

Cereal group’s sales from UK and Europe flow through operation beside Dublin Airport

Dublin-registered Kellogg Europe Trading  received a €17 million tax credit after it racked up heavy losses due to interest charged on loans from other Kellogg companies, including its parent in Luxembourg.

Dublin-registered Kellogg Europe Trading received a €17 million tax credit after it racked up heavy losses due to interest charged on loans from other Kellogg companies, including its parent in Luxembourg.

 

Breakfast cereals giant Kellogg directed more than €1.1 billion of sales from Europe through one of its Irish units last year, an increase of 16 per cent.

However, Dublin-registered Kellogg Europe Trading (KET) received a €17 million tax credit after it racked up heavy losses due to interest it is charged on loans from other Kellogg companies, including its parent in Luxembourg.

Ireland has long been a major cog in the Kellogg group’s tax planning and KET, which employs 190 staff and is based at a business park adjacent to Dublin Airport, is central to its international operations.

The unit registered 2019 sales of more than €446 million in the UK last year, according to accounts recently filed here, as well as almost €650 million from the rest of Europe. The Irish unit also recorded sales of about €23 million from the Middle East and Africa.

Various loans

KET made an operating profit of €102 million, but it paid €145 million in interest payments to other group companies, and also incurred €106 million in charges for streamlining and reorganising its operations in other European countries. The accounts show the company is funded through close to €3 billion in long and short-term loans from Luxembourg and other group entities.

As the interest bills to other group companies wipe out its profits each year, KET is due to pay little or no corporation tax here on its earnings. In fact, a note to its accounts reveals it has clocked up a tax credit of close to €100 million, which it will be able to offset against any future profits it may earn.

A directors’ note attached to the balance sheet said the Irish unit was expecting “significant increases in turnover and profits” in 2020 because of its European reorganisation. In particular, it appears that KET will be used from this year to also record European and African sales of the Pringles snacks brand, in addition to its cereals such as Cornflakes.

Breakfast cereals

Kellogg’s sales of breakfast cereals in the Irish market are put through an entirely different group entity, Kellogg Company of Ireland. Its sales last year rose about 5 per cent to €56.6 million and it made a profit before tax of €1.3 million, according to its recently filed financial statements. Its tax bill was cut to just €5,000 by a “group relief” credit claimed by Kellogg.

Overall, there are nine separate Kellogg companies domiciled in Ireland. These include, for example, Kellogg European Services, which provides loans denominated in Russian roubles to other Kellogg entities. It has a bank facility for the Russian roubles equivalent of $400 million (€329 million), but only the equivalent of about 6.5 billion roubles (€72 million) has been drawn down from the debt facility.

Most of the units it has registered in Ireland are treasury companies involved in complex loan agreements with Luxembourg and elsewhere. Kellogg last night said it had no comment to add to the details provided in its financial statements.