Minneapolis / MN. (gm) General Mills Inc. reported results for its fiscal 2023 third quarter. «We built on our positive momentum and delivered strong results in the third quarter, including broad-based growth across each of our segments,» said General Mills Chairman and Chief Executive Officer Jeff Harmening. «Our team continues to manage well through ongoing supply chain disruptions and volatility in the operating environment. Our brands are winning with consumers, and we plan to sustain this momentum by continuing to invest in brand building, innovation, and capabilities that will drive future growth. With strong year-to-date performance and good visibility to the fourth quarter, we are once again raising our fiscal 2023 outlook for our key financial measures.»
General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and standing for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to reshaping its portfolio with strategic acquisitions and divestitures to further enhance its growth profile.
Third Quarter Results Summary
- Net sales increased 13 percent to USD 5.1 billion, including a 2-point headwind from net divestiture and acquisition activity and 1 point of unfavorable foreign currency exchange. Organic net sales increased 16 percent, driven by positive organic net price realization and mix, with organic pound volume essentially matching year-ago levels.
- Gross margin was up 160 basis points to 32.5 percent of net sales, driven by favorable net price realization and mix, partially offset by higher input costs and unfavorable mark-to-market effects. Adjusted gross margin was up 240 basis points to 33.8 percent of net sales, driven by favorable net price realization and mix and Holistic Margin Management (HMM) cost savings, partially offset by input cost inflation and higher other cost of goods sold.
- Operating profit of USD 730 million was down 10 percent, reflecting higher selling, general, and administrative (SG+A) expenses and a lower net gain on divestitures, partially offset by higher gross profit dollars. Operating profit margin of 14.2 percent was down 380 basis points. Constant-currency adjusted operating profit increased 20 percent, driven by higher adjusted gross profit dollars, partially offset by higher adjusted SG+A expenses, including a double-digit increase in media investment. Adjusted operating profit margin increased 80 basis points to 15.7 percent.
- Net earnings attributable to General Mills declined 16 percent to USD 553 million and diluted EPS was down 15 percent to USD 0.92, driven by lower operating profit, lower after-tax earnings from joint ventures, higher net interest expense, and lower benefit plan non-service income, partially offset by lower net shares outstanding. Adjusted diluted EPS of USD 0.97 increased 17 percent in constant currency, driven by higher adjusted operating profit and lower net shares outstanding, partially offset by lower after-tax earnings from joint ventures, higher net interest expense, a higher adjusted effective tax rate, and lower benefit plan non-service income.
Nine Month Results Summary
- Net sales increased 7 percent to USD 15.1 billion, including a 4-point headwind from net divestiture and acquisition activity and 1 point of unfavorable foreign currency exchange. Organic net sales increased 12 percent, driven by positive organic net price realization and mix, partially offset by lower organic pound volume.
- Gross margin was down 80 basis points to 32.0 percent of net sales, driven by higher input costs, unfavorable mark-to-market effects, and the impact of market index pricing on bakery flour, partially offset by favorable net price realization and mix. Adjusted gross margin was up 110 basis points to 33.9 percent of net sales, driven by favorable net price realization and mix, partially offset by higher input costs and the impact of market index pricing on bakery flour.
- Operating profit of USD 2.6 billion was up 6 percent, driven by net gains on divestitures and higher gross profit dollars, partially offset by higher SG+A expenses and unfavorable net corporate investment activity. Operating profit margin of 17.4 percent essentially matched year-ago levels. Constant-currency adjusted operating profit increased 11 percent, driven by higher adjusted gross profit dollars, partially offset by higher adjusted SG+A expenses, including a double-digit increase in media investment. Adjusted operating profit margin increased 60 basis points to 17.0 percent.
- Net earnings attributable to General Mills increased 5 percent to USD 2.0 billion and diluted EPS was up 7 percent to USD 3.28, primarily reflecting higher operating profit and lower net shares outstanding, partially offset by lower after-tax earnings from joint ventures and lower benefit plan non-service income. Adjusted diluted EPS of USD 3.18 was up 14 percent in constant currency, driven primarily by higher adjusted operating profit, a lower adjusted effective tax rate, and lower net shares outstanding, partially offset by lower after-tax earnings from joint ventures and lower benefit plan non-service income.
Notes on Comparability
Financial results in the first nine months of fiscal 2023 reflected the acquisition of Tyson Foods’ pet treat business in the first quarter of fiscal 2022; the divestiture of the European yogurt business in the third quarter of fiscal 2022; the divestiture of certain international dough businesses in the third and fourth quarters of fiscal 2022; the acquisition of the TNT Crust foodservice business in the first quarter of fiscal 2023; and the divestiture of the Helper main meals and Suddenly Salad side dishes business in the first quarter of fiscal 2023.
Nine-month results in fiscal 2023 also included the impact of a voluntary recall on certain international «Häagen-Dazs» ice cream products, which was a headwind to net sales and operating profit results in the International segment. Unallocated corporate items in the first nine months included an additional USD 26 million of charges related to product disposals associated with the ice cream recall that were excluded from adjusted operating profit results. The company does not expect a further material impact from the ice cream recall going forward.
For additional information please read the company’s PDF file below (174 KB):
20230324-GENERALMILLS-Q32023.