US: Gen Mills Q1 profits down but recent M&A boosts sales
By Dean Best | 18 September 2013
General Mills has reported a fall in first-quarter earnings, although recent acquisitions helped boost sales.
The owner of brands including Yoplait yoghurt and Cheerios cereal saw net income slide 16.7% to US$459.3m for the quarter to 25 August. A year ago, General Mills benefited from a tax benefit and a higher mark-to-market valuation of some of its commodity positions.
Operating profit was down 5.8% at $734.8m. Segment operating profit, which excludes corporate expenses, was up 6%.
Net sales climbed 8% to $4.37bn. General Mills said new businesses acquired in the last year, including the Canadian Yoplait business and Brazilian firm Yoki, boosted the top line by five percentage points.
General Mills is ploughing investment into NPD and chairman and CEO Ken Powell said the company had started to see the benefit.
"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. These first-quarter results have us on track to achieve the key financial targets we've set for fiscal 2014."
The company reaffirmed its full-year forecasts of low single-digit growth in net sales, mid single-digit growth in segment operating profit, and adjusted diluted earnings per share of $2.87 to $2.90.
|General Mills Reports Fiscal 2014 First Quarter Results|
|Company Reaffirms Full-year Outlook
MINNEAPOLIS, Sept. 18, 2013 /PRNewswire/ -- General Mills (NYSE: GIS) today reported results for the first quarter of fiscal 2014. The period includes three months of incremental contribution from new businesses (Yoplait Canada, Yoki Alimentos and Immaculate Baking Company) added in the previous year.
Fiscal 2014 First Quarter Financial Summary
Net sales for the 13 weeks ended Aug. 25, 2013, grew 8 percent to $4.37 billion. Pound volume grew 8 percent, primarily reflecting acquisitions. Price realization and mix contributed 1 point of net sales growth, and foreign exchange subtracted 1 point of growth. Gross margin was below year ago levels, reflecting changes in mark-to-market valuation of certain commodity positions, input cost inflation and the change in business mix. Advertising and media expense was 7 percent higher than year-ago levels. Total segment operating profit grew 6 percent to $812 million (please see Note 8 below for reconciliation of this non-GAAP measure). First-quarter net earnings attributable to General Mills totaled $459 million and diluted earnings per share totaled 70 cents. These results were below year-ago levels that included a net benefit of 16 cents per share from several discrete items. Adjusted diluted EPS, which excludes certain items affecting comparability, totaled 70 cents in the first quarter of fiscal 2014, up 6 percent compared to 66 cents a year ago (please see Note 8).
Chairman and Chief Executive Officer Ken Powell said this 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. These first-quarter results have us on track to achieve the key financial targets we've set for fiscal 2014."
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 including 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.
U.S. Retail Segment Results
First-quarter net sales for General Mills' U.S. Retail segment totaled $2.58 billion, up 4 percent from a year earlier. Pound volume grew 1 percent, 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. Meals division net sales declined slightly. U.S. Retail segment advertising and media expense increased 4 percent from year-ago levels, and segment operating profit grew 6 percent to $612 million.
International Segment Results
First-quarter net sales for General Mills' consolidated international businesses grew 22 percent to reach $1.32 billion. Pound volume grew 30 percent, driven by new businesses. Price realization and mix subtracted 5 points of net sales growth, and foreign currency subtracted 3 points. On a constant-currency basis, International segment net sales rose 25 percent overall, led by growth in Latin America and Canada. Latin America net sales nearly tripled on a constant-currency basis including incremental contributions from Yoki, and constant-currency net sales in Canada rose 21 percent including the Yoplait business that transitioned to direct ownership in September 2012. Constant-currency net sales in the Asia / Pacific region grew 13 percent, and declined 3 percent in Europe. (Please see Note 8 below for reconciliation of this non-GAAP measure.) International segment operating profit of $126 million essentially matched strong year-ago levels despite input cost inflation, negative foreign currency effects, and a 15 percent increase in advertising and media expense.
Convenience Stores and Foodservice Segment Results
First-quarter net sales for the Convenience Stores and Foodservice segment totaled $468 million, 1 percent below year-ago results. Pound volume declined 3 percent, while net price realization and mix contributed 2 points of net sales growth. Baking mixes, cereal and frozen breakfast items led sales performance in the quarter. Segment operating profit grew 10 percent in the quarter to $74 million.
Joint Venture Summary
Combined after-tax earnings from the Cereal Partners Worldwide (CPW) and Haagen-Dazs Japan (HDJ) joint ventures totaled $24 million, up 4 percent from year-ago results. Constant-currency net sales for CPW grew 1 percent in the quarter, and constant-currency net sales for HDJ essentially matched strong prior-year levels.
Unallocated corporate items totaled $74 million of expense in this year's first quarter, compared to $21 million of income a year ago. Mark-to-market valuation of certain commodity positions represented a $1 million net increase in expense in the first quarter of 2014 compared to a $82 million net decrease in expense in last year's first quarter. Excluding these mark-to-market effects, unallocated corporate items totaled a net $73 million of expense this year compared to a net $61 million of expense a year ago.
Net interest expense of $79 million was 5 percent below year-ago levels, primarily due to changes in debt mix. The effective tax rate was 32.3 percent in this year's first quarter. Excluding mark-to-market effects in both 2014 and 2013, along with a discrete tax item recorded in the first quarter of 2013, the adjusted effective tax rate was 32.2 percent in this year's first quarter compared to 31.4 percent a year ago. (Please see Note 8 below for a reconciliation of this non-GAAP measure.)
Cash Flow Items
Cash provided by operating activities totaled $381 million in the first quarter. Capital investments in the period totaled $124 million. Dividends paid rose to $248 million, reflecting the 15 percent increase in the dividend rate year-over-year. During the first quarter, General Mills repurchased more than 6 million shares of common stock at an aggregate price of $327 million. Average diluted shares outstanding totaled 660 million for the first quarter of 2014, down 1 percent from year-ago levels.
Powell said, "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." 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 EPS of $2.87 to $2.90.
Original source: General Mills
Companies: General Mills
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US: Gen Mills Q1 profits down but recent M&A boosts sales