General Mills sees solid start to fiscal '14 despite drop in profit
by Eric Schroeder
MINNEAPOLIS — New products drove solid sales gains at General Mills, Inc. even as earnings fell in the first quarter of fiscal 2014.
Net income in the quarter ended Aug. 25 was $459.3 million, equal to 71c per share on the common stock, down 16% from $548.9 million, or 84c per share, during the same quarter of the previous year. Last year’s results included a 7c per share benefit from mark-to-market valuation of certain commodity positions and a 10c net benefit related to a discrete tax item. The benefits partially were offset by 1c per share in charges related to restructuring actions taken during 2012 and acquisition-related integration expense.
Adjusted e.p.s. totaled 70c per share in the just ended first quarter, up from 66c in the first quarter of fiscal 2013.
Sales for the quarter were $4,372.7 million, up 8% from $4,051 million during the same quarter of the previous year. New products contributing to net sales growth in the quarter included Yoplait Greek yogurt, Nature Valley Soft-baked Oatmeal Squares, Honey Nut Cheerios Medley Crunch cereal, Pillsbury gluten-free refrigerated dough products, new Helper dinner mix varieties and, in Brazil, new Yoki Kit Facil dinner mixes. Established brands such as Lucky Charms and Cinnamon Toast Crunch cereals, Progresso Light ready-to-serve soups, Yoplait Greek 100-calorie yogurt, Totino’s frozen pizza and snacks, Larabar fruit and nut energy bars and, in China, Wanchai Ferry frozen dumplings and dim sum varieties, also contributed to net sales growth, the company said.
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Ken Powell, chairman and chief executive officer, said the first-quarter performance represented a solid start to the new fiscal year.
“In particular, our net sales growth in the quarter reflects a healthy mix of gains from established brands, strong introductory shipments for new products, and contributions from new businesses added to our portfolio,” he said. “These first-quarter results have us on track to achieve the key financial targets we've set for fiscal 2014.”
Operating profit for the U.S. Retail Segment was $611.9 million, up 6% from $575.1 million during the same quarter of the previous year. Sales for the segment were $2,584.1 million, up 4% from $2,493.9 million.
General Mills said volume increased 1%, and net price realization and mix contributed 3 percentage points of net sales growth.
“The Snacks, Big G, Baking Products and Small Planet Foods divisions each contributed to the U.S. Retail segment net sales increase, and Yoplait and Frozen Foods division net sales matched year-ago results,” General Mills said. “Meals division net sales declined slightly. U.S. Retail segment advertising and media expense increased 4% from year-ago levels, and segment operating profit grew 6% to $612 million.”
Operating profit within the International segment eased 0.2% to $125.6 million from $125.8 million, while sales increased 22% to $1,320.8 million from $1,085.5 million. General Mills said net sales in Latin America nearly tripled on a constant currency basis, including incremental contributions from Yoki, and constant currency net sales in Canada rose 21%, including the Yoplait business that transitioned to direct ownership in September 2012.
Within the company’s Convenience Stores and Foodservice segment operating profit rose nearly 10% to $74.1 million from $67.7 million. Sales in the division were $467.8 million, down from $471.6 million. General Mills said baking mixes, cereal and frozen breakfast items led sales performance in the quarter.
“We continue to be excited about our 2014 business plans, which call for sales and earnings growth consistent with our long-term model, along with strong cash returns to shareholders through dividend growth and share repurchase activity,” Mr. Powell said.
The company reaffirmed its full-year fiscal 2014 guidance of low single-digit growth in net sales, mid-single-digit growth in segment operating profit, and adjusted diluted e.p.s. of $2.87 to $2.90.