General Mills today (20 December) lowered its forecasts on key sales and operating profit metrics after a second quarter of falling sales across the business and a slump in profits from its international operations.
The owner of brands from Cheerios cereal to Yoplait yogurt said it now expects its annual net sales to fall 3-4% on an organic basis, compared to its previous forecast of flat to down 2%.
General Mills, which has a range that also includes Old El Paso Mexican-style food and Progresso soup, said its constant-currency, total segment operating profit was now expected to rise by 2-4% over the full year, lower than its previous estimate of growth of 6-8%.
The updated forecast came as General Mills reported lower second-quarter sales and earnings.
The company posted a 7.1% fall in net sales to $4.11bn for the quarter to 27 November. Operating profit slid 15.1% to $768.9m. Net profit was 9% lower at $481.8m.
General Mills’ US retail business, which accounts for around two-thirds of the company’s sales, reported a 6% decline in sales on an organic basis.
Higher sales of Annie’s and Lärabar natural and organic products, as well of Old El Paso lines and of Totino’s frozen hot snacks were offset by declines in Yoplait, Pillsbury refrigerated dough and Progresso.
The division saw its segment operating profit increase 2%, which General Mills said was “primarily driven by benefits from cost savings initiatives and a decrease in media and advertising expense”.
General Mills’ international unit saw its net sales dip 1% on an organic basis, amid a 3% fall in volumes. The company said a “strong performance” in areas including Häagen-Dazs ice cream in Europe, Yoplait in China and Old El Paso in Canada were offset by declines from Yoplait in Europe and the impact of moves to restructure its snacks business in China.
The international division saw its segment operating profit fall 22%, or by 18% on a constant-currency basis. General Mills pointed to “currency-driven inflation on products imported into Canada and the U.K., as well as the Green Giant divestiture”.
Reflecting on the results, General Mills chairman and CEO Ken Powell said: “Although we posted disappointing net sales performance in the second quarter, we delivered good growth in adjusted diluted EPS, driven by significant expansion in our adjusted operating profit margin. Our organic sales declines reflect the actions we’ve taken to optimise our spending and prioritise profitable volume, as well as weakening food-industry trends in the US. We’re making targeted adjustments to our plans in the second half to improve our top-line performance while still delivering our margin expansion and EPS growth commitments.”
Shares in General Mills were down 3.27% in pre-market trading to $61. During the year-to-date, General Mills’ shares are up 9.37% at the time of writing.
Earlier this month, General Mills announced a revamp of the way it organises its operations in a bid to “maximise global scale”. Between 400 and 600 jobs are set to be affected.
What will General Mills’ reorganisation achieve? – just-food analysis