General Mills revealed that its operating profit jumped by one-fifth in the first quarter as the company stemmed its sales decline, benefited from efficiency gains and lapped soft comparatives.
The US cereal-to-meal solutions group reported a 20% rise in segment operating profit, which jumped to US$826m. Net earnings increased to $426.6m, versus $345.2m last year.
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Net sales declined 1% to $4.21bn but on a constant currency basis net sales were up 4% year-on-year. Significantly, General Mills was able to reverse declining trends in its US retail business, where sales in the 13 weeks to 30 August increased 4% with cereal, meals, yoghurt and snacks all returning to positive territory while baking solutions remained flat. International sales were up 5% excluding currency. However, the strength of the US dollar meant that overseas sales dropped 11% after foreign exchange expenses.
General Mills chairman and CEO Ken Powell said that the company's plans for fiscal 2016 anticipates “strong” first quarter growth, underpinned by the group's “consumer first” initiatives. Commenting on the first quarter result, Powell continued: "This strong net sales performance, combined with significant margin expansion efforts, drove double-digit growth in total segment operating profit and adjusted diluted EPS. These results represent a positive first step in delivering our full-year fiscal 2016 growth objectives."
Looking to the full year, General Mills said it anticipates net sales in constant currency will “essentially match” fiscal 2015. Operating profit is expected to rise in the low single digits, while EPS is forecast to rise in the mid single digits.
"We're pleased with our progress in the first quarter. At the same time, we know there is more work to be done to achieve our 2016 objectives. We remain focused on generating sustainable topline growth by expanding the impact of our 'consumer first' strategy while we continue to increase our efficiency and improve our margins,” Powell concluded.
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