US cereal maker General Mills has reported higher third-quarter net earnings but said it was disappointed with its results.

The company posted net earnings of US$242m for the third quarter to 22 February, compared to earnings of $240m in the year-ago quarter. Diluted earnings per share were flat at 63 cents. Third-quarter net sales rose 2% to $2.70bn.

The company said its net results included certain costs mainly related to its acquisition of Pillsbury in fiscal 2002. Diluted earnings per share excluding these costs would have totalled 64 cents for the third quarter in fiscal 2004, compared to 67 cents per share in last year’s third quarter.

“Our third quarter results were disappointing, and reflect the impact of higher supply chain costs and soft unit volumes,” said CEO Steve Sanger.

“We are introducing a number of new products, some of which address consumers’ current interest in lower carbohydrate choices. These new product introductions will be supported with increased levels of marketing spending in the fourth quarter. Because this is a 53-week fiscal year, we’ll also benefit from an extra week in the fourth quarter. We expect these factors to improve our volume trend,” he added.

General Mills reaffirmed its goal of reducing net debt by $450m in fiscal 2004, part of a longer-term plan to reduce net debt by $2bn by the end of fiscal 2006. The company said it is targeting fiscal 2004 earnings of $2.75 per share, including an estimated 10 cents of restructuring, merger and other related costs. In fiscal 2005, the company returns to a 52-week year. As a result, the company expects earnings-per-share growth to be less than double digit for 2005.