General Mills has raised its full-year earnings guidance on the back of a strong first quarter, driven by solid consumer demand for its products around its markets.
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The US consumer goods giant said that net sales for the first quarter grew 14% to US$3.5bn. Volume increases (measured in pounds) contributed four points of sales growth. Segment operating profits grew 9% to $632m, despite higher input costs and a 17% increase in consumer marketing investment.
Meanwhile, first-quarter net earnings totalled $279m – a fall of 3.6% – after a net reduction related to mark-to-market valuation of certain commodity positions.
Diluted earnings per share (EPS) totalled 79 cents, including a 17-cent net reduction related to mark-to-market valuation. Excluding the mark-to-market impact, earnings per share would have totalled 96 cents, up 19% from last year’s first quarter.
Chairman and CEO Ken Powell said: “We’re off to a great start in 2009, powered by strong consumer demand for our products in markets around the world. Our US retail sales grew 13%, international sales rose 15%, and bakeries and foodservice sales were up 17% for the quarter. Operating profits showed strong growth despite the input cost pressure and our increased consumer marketing investment. This broad momentum has us well on track to deliver solid sales and earnings growth for the full year.”
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By GlobalDataFirst-quarter net sales for General Mills’ US retail segment grew 13% to $2.3bn, with gains recorded by every division. Operating profits grew 11% to reach $526m, including a 16% increase in consumer marketing expense.
Meanwhile, first-quarter net sales for General Mills’ international business segment grew 15% to $690m, including six points of growth from foreign exchange. Pound volume matched prior-year levels. Operating profits grew 11% to $79m.
Sales growth was broad-based across the regions where the company competes. Net sales in Europe grew 14%. Sales in Canada rose 9%. And sales in the Asia/Pacific region and Latin America grew 26% and 14%, respectively.
“Sales and profit results for the first quarter exceeded our expectations,” said Powell. “This strong start increases our confidence that 2009 will be another year of good growth for our company, even though we continue to estimate our input cost inflation at 9%.”
The company said that fiscal 2009 net sales are expected to grow at a mid single-digit rate, driven primarily by price and mix. Segment operating profits are also expected to grow at a mid single-digit rate. Diluted earnings per share as reported will continue to include mark-to-market valuation of commodity positions, but the company cannot predict its effect on earnings, a statement said.
In addition, the company said it will record a gain on the sale of its Pop Secret microwave popcorn business in the second quarter of 2009. Excluding that gain, and assuming no mark-to-market impact in fiscal 2009, the company updated its earnings guidance to a range of $3.81 to $3.85 per share. Previously, the company’s 2009 earnings guidance was a range of $3.78 to $3.83 per share.
