Minneapolis-based food giant General Mills has posted diluted earnings per share of US$1.70 before unusual items for the fiscal year ended 26 May 2002.
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During 2002, General Mills recorded unusual items expense of 35 cents per share, primarily related to its acquisition of Pillsbury on 31 October 2001. Including these unusual items and the cumulative effect (1 cent per share) of an accounting change, General Mills’ fiscal 2002 diluted earnings per share totalled US$1.34.
Chairman and CEO Steve Sanger characterised FY 2002 as a year of significant transition: “We successfully completed our acquisition of Pillsbury, which we believe will enhance our future growth. But while the integration progress met or exceeded our objectives, unit volume and earnings performance during the integration period did not.
“Our plans for FY 2003 are focused on renewing unit volume growth across our business,”
Sanger continued. “We also expect to realise US$350m in cost synergies next year from our combination with Pillsbury. Meeting our unit volume and synergy targets should enable us to achieve diluted earnings per share of about US$2.60 before unusual items for FY 2003.”
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By GlobalDataFY 2002 summary
Net sales in FY 2002 totalled US$7.95bn. This total reflects the adoption of a new accounting standard, EITF 01-09, which reduced 2002 sales by about US$2.25bn, and reduced selling, general and administrative expense (SG&A) by the same amount.
Fiscal 2002 worldwide unit volume was 48% above the prior year. On a comparable basis, as if General Mills had owned Pillsbury for all of the preceding year, worldwide unit volume in 2002 was up slightly.
EBIT grew 9% to US$1.27bn. JV earnings, which are reported on an after-tax basis, nearly doubled to US$33m. This growth reflected strong profit gains by Cereal Partners Worldwide (CPW), the company’s jv with Nestlé; and Snack Ventures Europe (SVE), a jv with PepsiCo. In addition, Haagen-Dazs joint ventures established by Pillsbury in Asia-Pacific markets contributed incremental profits.
Earnings after tax declined 10% before unusual items, reflecting the impact of additional interest expense associated with the Pillsbury acquisition. Diluted earnings per share (EPS) of US$1.70 were 25% lower than the US$2.28 earned in 2001. Average diluted shares outstanding were 342 million in 2002, up 17% from 292 million in fiscal 2001.
Q4 summary
Q4 sales grew 76% to US$2.32bn (net of expenses reclassified under EITF 01-09). Worldwide unit volume grew 74% as reported, but declined 1% on a comparable basis. Before unusual items, Q4 EBIT rose 28% to US$278m, earnings after tax declined 23% to US$94m, and diluted earnings per share declined 40% to 25 cents.
US retail segment results
Sales for the domestic retail operations were US$6.14bn in FY 2002. Operating profits totalled US$1.07bn, up 1% on the prior year. For the FY, comparable unit volume was 1% below the prior year.
In the Q4, domestic retail sales totalled US$1.59bn and operating profits were US$171m compared to US$201m for the same period a year ago. The lower profit was due to a 4% decline in Q4 domestic unit volume and the associated loss of operating leverage.
Bakeries and Foodservice segment results
Sales for the Bakeries and Foodservice operations reached US$1.03bn in FY 2002, and operating profits rose 60% to US$146m reflecting the incremental contribution from Pillsbury’s bakery and foodservice operations. Comparable unit volume essentially matched prior-year levels, reflecting overall industry trends and lower results for our in-store retail bakery segment. Q4 sales grew to US$413m, and operating profits were US$52m. Comparable unit volume was down 1%.
International segment results
Sales for the wholly owned international operations totalled US$778m in FY 2002 compared to US$263m in 2001. Operating profits grew to US$45m, more than double last year’s US$17m total. Comparable unit volume rose 4% for the year. Q4 international sales totalled US$317m and operating profits for the period reached US$24m. Unit volume was up 6% in the final quarter.
Joint venture summary
Total after-tax earnings from jv operations reached US$33m in FY 2002, compared with US$17m reported a year earlier. Profits for CPW and SVE together grew to US$31m. Haagen-Dazs joint ventures in Asia contributed profits for the six months included in the income statement. These profit gains were partially offset by introductory marketing expense at 8th Continent, the company’s soymilk jv with DuPont. Q4 joint venture earnings totalled US$13m after tax, with CPW and SVE combining to deliver US$11m of that total.
Fiscal 2003 outlook
Commenting on FY 2003, Sanger said: “Our unit volume for the month of June is ahead of last year’s on a comparable basis, so we’re off to a good start. For the Q1 in total, we’re looking for volume to be slightly ahead of last year’s, with diluted EPS of 51 to 55 cents per share before unusual items. That’s below last year’s Q1 EPS of 62 cents due to significantly more shares outstanding, but it would represent growth in earnings after tax for the period.
“For fiscal 2003 in total, we are targeting about 4% growth in comparable worldwide unit volume – we expect to grow slower than that in the H1, and faster in the H2, when our comparisons are easier,” Sanger concluded. “We expect our earnings per share in 2003 to be relatively evenly split between the front and back half of the year, with diluted EPS before unusual items growing at a double-digit pace beginning in the Q2, and reaching about US$2.60 for the full year.”
