Sales rise while profits dip for General Mills

by World Grain Staff
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MINNEAPOLIS, MINNESOTA, U.S. — Sales increased 13% in the third quarter for General Mills, Inc., behind Yoplait volume while earnings attributable to the company dipped 0.2% as input cost inflation affected results negatively.

Third-quarter earnings attributable to General Mills were $391.5 million, equal to 61¢ per share on the common stock, which compared with $392.1 million, or 61¢ per share, in the previous year’s third quarter.

Net sales for the quarter ended Feb. 26 were $4.12 billion, which compared with $3.646 billion in the previous year’s third quarter. Price realization and mix contributed three points of net sales growth, and pound volume contributed 10 points, including 13 points of pound volume growth from the Yoplait acquisition.

Minneapolis-based General Mills in July of 2011 announced it had completed the acquisition of a 51% controlling interest in Yoplait SAS and a 50% interest in a related entity that holds the worldwide Yoplait brands from PAI Partners and Sodiaal in a transaction valued at about $1.2 billion.

“Our third-quarter results reflect strong worldwide sales growth for our business, but the 10% to 11% input cost inflation we’re experiencing this year pressured our margins,” said Ken Powell, chairman and chief executive officer of General Mills, when third-quarter results were given March 21. “In the fourth quarter, we expect to generate continued good sales momentum, and we anticipate that gross margin contraction will ease somewhat. This should result in renewed earnings growth as we wrap up 2012 and move into the new fiscal year.”

General Mills reaffirmed its earnings-per-share guidance of $2.53 to $2.55 per share for fiscal year 2012.

“Fiscal 2012 has represented a challenging operating environment with the highest level of commodity inflation that we’ve seen in 30 years,” Powell said. “But sales of our leading food brands remain strong in markets around the world, putting General Mills on pace to achieve record-level net sales and adjusted diluted earnings per share.”

In the third quarter, gross margin as a per cent of net sales was below year-ago levels due to higher input costs and the change in business mix to include the Yoplait acquisition. Advertising and media expense was 8% higher.

In the International segment, third-quarter operating profit of $96 million marked a 40% increase from $69 million in the previous year’s third quarter. Advertising and media expense grew 31% for International in the third quarter.

International sales in the third quarter jumped 51% to $1.041 billion from $688.4 million. The Yoplait acquisition accounted for 43 points of net sales growth. General Mills saw sales more than double in Europe and sales gains of 37% in Canada, 15% in the Asia/Pacific region and 12% in Latin America.

Companywide for the nine months ended Feb. 26, net earnings attributable to General Mills was $1.241 billion, or $1.92 per share, which was down 16% from $1.478 billion, or $2.30 per share, in the same time period of the previous year. Net sales for the nine-month period were $12.591 billion, up 12% from $11.245 billion in the same time period of the previous year.

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