MINNEAPOLIS — Higher costs coupled with charges related to the company’s acquisition of the international Yoplait business led earnings lower at General Mills, Inc. in the second quarter. Net income in the quarter ended Nov. 27 was $444.8 million, equal to 69c per share on the common stock, down 28% from $613.9 million, or 96c per share, in the same period a year ago.
Sales for the quarter were $4,623.8 million, up 14% from $4,066.6 million during the same quarter of the previous year.
“General Mills’ second-quarter results show good net sales growth worldwide,” said Ken Powell, chairman and chief executive officer. “Our Yoplait acquisition fueled a more than 50% increase in total international sales. Strong levels of net price realization and product innovation drove sales increases for our established international operations and for our Bakeries & Foodservice and U.S. Retail business segments.
Significantly higher input costs pressured our margins, as expected. But in total, performance for the quarter and year-to-date has us on track to meet the key financial targets we have set for fiscal 2012.”
The U.S. Retail segment had an operating profit of $661.4 million in the quarter, down 4% from $687.4 million during the same quarter of the previous year. Sales for the segment were $2,938.3 million, up 3% from $2,850.1 million.
General Mills said net sales for Big G cereals grew 1% in the second quarter, reflecting gains from established brands such as Honey Nut Chex and Cinnamon Toast Crunch. The company also received strong contributions from new products, including Cinnamon Burst Cheerios and Fiber One 80 Calorie cereal.
Net sales for the Snacks division rose 20% in the quarter, led by Fiber One and Nature Valley snack bar varieties. Meanwhile, sales for the Pillsbury division rose 9% behind good contributions from Totino’s frozen snacks and pizza, Pillsbury refrigerated baked goods and new Pillsbury frozen breakfast items.
General Mills said sales in its Baking Products division were up 2%, reflecting strong net price realization, while sales in its Meals division fell 2%. Yoplait division sales were 6% behind year-ago levels as growth from Go-Gurt, Yoplait Greek and Mountain High yogurt was offset by declines in several established product lines.
For the six months ended Nov. 27, operating profit in the U.S. Retail division was $1,246.6 million, down 4% from $1,302 million, while sales rose 3% to $5,448.6 million from $5,296.7 million.
Operating profit in the Bakeries & Foodservice segment totaled $77.8 million in the second quarter, up 0.9% from the same period a year ago. Net sales increased 12% to $522.2 million from $467.7 million. General Mills said customer channel performance was strong, with net sales to convenience stores up 14%, sales to food service distributors up 11%, and sales to bakeries and national restaurant accounts up 12%.
For the six months, operating profit in Bakeries & Foodservice eased 7% to $139.2 million from $149.6 million. Sales, meanwhile, climbed 12% to $1,003.2 million from $894.4 million.
The International segment posted operating profit of $133.5 million, up 51% from $88.7 million during the same quarter of the previous year. Sales for the segment were $1,163.3 million, up 55% from $748.8 million. For the first six months of fiscal 2012, operating profit was $214.2 million, up 42% from $150.7 million, while sales increased 43% to $2,019.6 million from $1,408.6 million.
After-tax earnings from the Cereal Partners Worldwide and Haagen Dazs Japan joint ventures totaled $29 million in the second quarter, down from $35 million a year ago. The decline primarily reflected higher input costs for C.P.W.
Overall, for the six months ended Nov. 27, the company had earnings of $850.4 million, or $1.31 per share, down 22% from $1,086 million, or $1.68 per share, in the same period a year ago. Sales for the segment were $8,471.4 million, up 12% from $7,599.7 million.
Looking ahead, Mr. Powell said General Mills expects double-digit sales growth in the second half of fiscal 2012 and high single-digit to low double-digit growth in adjusted earnings per share.
“Our net sales in the second half will continue to reflect the significant addition of international Yoplait revenues,” Mr. Powell said. “We also expect our base business to show good sales growth, fueled by strong levels of product innovation and consumer marketing support.”