Despite rising costs, General Mills yesterday (23 March) reported a 17% increase in earnings per share to US$0.68. Sales grew 3% to $2.86bn, boosted by a strong performance from its Yoplait division.
Chairman and chief executive officer Steve Sanger said: “Results for the third quarter met our expectations. We continued to achieve good topline growth, with all three of our business segments posting net sales increases in the quarter. But as we anticipated, profit growth was restrained by higher input costs (primarily commodities and fuel), higher employee benefits expense and increased advertising investment.”
Through the first nine months, General Mills net sales grew 3% to $8.80bn, driven by a 2% increase in worldwide unit volume. Segment operating profits grew 5% to $1.63bn. Earnings after tax grew 11% to $868m. Diluted EPS totalled $2.29 compared to $1.94 last year.
Net sales for General Mills’ domestic retail operations grew 3% in the third quarter to $1.99 billion, driven by a 3% unit volume increase. Operating profits totalled $420m, matching prior-year results.
Net sales for the Yoplait division grew 9% over last year’s third quarter. Big G cereal net sales grew 5% from last year’s third quarter results when merchandised price increases resulted in a decline in net sales.
Baking Products net sales grew 12%, reflecting good performance during the holiday baking season. Net sales for the Snacks division grew 4% led by continued good growth on Nature Valley granola bars. Net sales for Pillsbury USA and the Meals division each grew 1%.
Net sales for the company’s consolidated international businesses grew 3% in the third quarter to $444m. Unit volume grew 4%. Two points of growth from pricing and mix were more than offset by the negative impact of foreign exchange in the quarter. Operating profit grew to $37 million, up 16% from $32m last year.
Third-quarter net sales for General Mills’ Bakeries and Foodservice segment grew 3% to $424m, reflecting net price realisation. Unit volume matched last year’s third quarter. Segment operating profit decreased 8% due to higher input costs.
Sanger said: “Our first-half performance allowed us to raise our 2006 EPS guidance slightly, despite incremental input cost pressure in our second half. With third-quarter results meeting our expectations, we remain solidly on track to achieve our full-year EPS target of $2.80 to $2.85 per share, including an estimated 8 cents of dilution associated with accounting for contingently convertible debt.”