Gen. Mills Tops Profit Estimates but Predicts Rising Costs
General Mills, Inc., on Wednesday reported better-than-expected third-quarter earnings, prompting it to increase its full-year outlook by a penny, although the company warned that increased prices could hamper fourth-quarter results.
The Golden Valley-based company said third-quarter results benefitted from recently acquired businesses, as well as newly introduced products, including Honey Nut Cheerios Medley Crunch cereal, Fiber One protein bars, and Yoplait Greek 100 yogurt. Older brands, such as traditional Cheerios, Lucky Charms, Progresso ready-to-serve soups, and Nature Valley snack bars also contributed to sales growth.
Net earnings totaled $398.4 million, or 60 cents per share, up about 1.7 percent from the same period a year ago. Adjusted earnings—which exclude restructuring, acquisition, and certain other costs—totaled 64 cents per share, up from 55 cents during last year’s third quarter and topping the 57 cents per share that analysts polled by Thomson Reuters were expecting.
Net revenue for the quarter that ended February 24 grew 8 percent to $4.43 billion—and the boost was attributed largely to the acquisition of Yoki Alimentos, a Brazil-based packaged foods company that General Mills bought last year for about $859 million, and Yoplait’s Canada operations. (General Mills acquired a majority stake in Yoplait, S.A.S, in 2011; it then reached a licensing deal to begin marketing Yoplait in Canada last fall.) Excluding contributions from new businesses, General Mills’ sales grew 2 percent during the third quarter.
Yoplait yogurt varieties in Europe, along with HÃ¤agen-Dazs super-premium ice cream and Wanchai Ferry frozen dim sum varieties in China, helped drive international sales growth, the company said.
“Our sales and volume growth reflects contributions from new businesses and from established products,” Chairman and CEO Ken Powell said in a statement. “Operating profit results for the quarter were particularly good, with double-digit increases for both our U.S. retail and bakeries and foodservice segments.”
General Mills said, however, that it expects higher supply-chain and merchandising costs during the fourth quarter. It did not provide a specific outlook for the fourth quarter but said it expects earnings to be lower than last year’s fourth quarter, when it reported adjusted earnings of $0.60 per share.
For the full fiscal year, the company said it expects adjusted earnings to be in the range of $2.66 to $2.68 per share. That’s up slightly from its previous outlook of $2.65 to $2.67, and it would represent an increase from the prior year’s adjusted earnings, which totaled $2.56 cents per share.
“We are continuing to see slow but steady improvement in the operating environment,” Powell said in a statement. “Trends in our established businesses are improving, and integration of our new businesses is going smoothly.”
The company plans to introduce “a promising slate of new products” this summer and expects fiscal 2014 earnings per share to grow by high single digits, Powell added.
General Mills is Minnesota’s seventh-largest public company based on revenue, which totaled $16.7 billion in its most recently completed fiscal year. Shares of the company’s stock were trading up about 2.7 percent at $47.66 Wednesday morning.