AP Business Writer
March 23, 2011
NEW YORK (AP) — General Mills Inc.'s net income rose 18 percent in the fiscal third quarter, driven by the sale of more snacks and strength abroad.
The maker of Nature Valley snack bars and Cheerios cereal has started to raise prices for some of its products over the past few months to cope with rising ingredient costs. It expects price increases will accelerate during the current fiscal fourth quarter.
Chairman and CEO Ken Powell anticipates that quarter will include the "highest earnings growth of the year."
That expectation led the food company to maintain its 2011 earnings and revenue outlooks Wednesday.
For the period ended Feb. 27, General Mills earned $392.1 million, or 59 cents per share. That's up from $332.5 million, or 48 cents per share, a year earlier.
Adjusted earnings were 56 cents per share, matching the expectations of analysts surveyed by FactSet.
The food maker, which is in exclusive talks to buy a majority stake in French yogurt maker Yoplait, said its quarterly revenue climbed 2 percent to $3.65 billion. Wall Street forecast $3.7 billion.
Revenue for the snack division increased 14 percent, with Nature Valley and Fiber One snack bars among its strongest performers.
Revenue from Yoplait yogurt, which General Mills makes in the U.S. under license from the French company Sodiaal, rose 1 percent. General Mills anticipates the proposed Yoplait transaction will close in the fiscal first quarter of 2012.
The company also saw solid results from its Small Planet Foods natural and organic unit, with revenue up 14 percent. Revenue for the bakeries and foodservice division rose 9 percent.
General Mills said revenue for its U.S. retail business dipped 1 percent.
Better results were reported overseas. International revenue climbed 8 percent to $688 million, powered by strength in the European and Asia/Pacific regions.
The company's Haagen-Dazs ice cream is doing well overseas, particularly in France, Chris O'Leary, executive vice president and chief operating officer, international, said during a conference call.
Chief Financial Officer Don Mulligan said sales for Haagen-Dazs Japan were soft, and business is expected to be hurt by the earthquake and tsunami there earlier this month.
A warehouse in Sendai was destroyed, but operations in other parts of Japan are running.
General Mills raised prices in several product categories, including flour and frozen vegetables, in January.
While the Minneapolis company had benefited during the economic downturn from more Americans eating at home more often, in recent months it has had to deal with rising ingredient costs.
Powell said during an interview that consumers are seeing a general increase in most food prices due to broad-based inflation.
To that end, Mulligan said General Mills has worked at keeping its products "mainstream priced." This value pricing, coupled with brand loyalty, has helped shopper response to prices, he said.
Mulligan also indicated that consumers will see promotions moderate as higher inflation takes hold. While General Mills will continue to use some promotions as part of its marketing strategy, Mulligan said the intense promotions earlier in the year have eased.
For fiscal 2012, the company predicts supply chain inflation will come in above this year's estimated 4 percent to 5 percent rate.
The revenue increases in snacks, Yoplait and other segments helped offset weak Big G cereal revenue, which fell 6 percent. Powell said the segment faced a difficult comparison with last year, which included the rollouts of Chocolate Cheerios and Wheaties Fuel.
For the full year, General Mills still anticipates adjusted earnings of $2.46 to $2.48 per share. Analysts predict $2.48 per share.
The company is also keeping its forecast for a low-single-digit percentage increase in 2011 revenue.
General Mills' stock fell 52 cents to $36.39 in afternoon trading.