Shares in General Mills climbed today (21 September) after the US food group reported quarterly profits that beat Wall Street forecasts, but failed to match the same period last year.
The company booked a 14.1% fall in net profit to US$405.6m for its first quarter to 28 August. Operating profit declined 16% to $638.9m. Adjusted diluted earnings per share, which excludes the effects of the mark-to-market valuation of commodity positions, were $0.64, the same as a year earlier.
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General Mills said its net sales increased 9% to $3.85bn thanks in the main to the impact of its acquisition of a 50% stake in yoghurt maker Yoplait earlier this year. Currency translation, “price realisation and mix” and a 2% rise in volumes also helped sales.
However, the company said its input costs were “significantly higher” than in the first quarter of its previous financial year, which affected its profits.
Nevertheless, according to Sanford Bernstein analyst Alexia Howard, General Mills adjusted diluted EPS was two cents higher than the consensus of Wall Street analysts.
Howard said she expected General Mills’ sales to continue to improve in the second quarter of its financial year thanks to its US cereals business, which, she said, could boost the company’s shares.
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By GlobalData“We expect the top line to continue to improve in the second quarter of fiscal 2012 as we move past tough comparables in the US cereals category, in addition to price increases and new product launches helping the top line,” Howard said. “With much easier comparables ahead, an acceleration in Big G cereals may provide for a positive catalyst for the stock in the near term.”
However, Howard said the US yoghurt sector would “remain challenging” for General Mills. In the first quarter, the company’s yoghurt sales fell 3% as it faced what Howard called “the Greek yoghurt phenomenon”. She added: “Although the addition of capacity and start of a new marketing campaign on Yoplait Greek improved the situation in August, it may take some time to return to the old growth trajectory.”
General Mills shares were up 2.53% at $38.44 at 16:21 ET today.
