Minneapolis / MN. (gm) General Mills Inc. reported results for the fourth quarter and full fiscal year ended May 26, 2013. Contributions from new businesses in fiscal 2013 primarily reflect results for Yoki Alimentos in Brazil and Yoplait International.
Fiscal 2013 Results Summary
Net sales grew seven percent to 17,8 billion USD. New businesses contributed six points of net sales growth. Excluding new businesses, net sales grew one percent. Segment operating profit grew six percent to 3,2 billion USD. Diluted earnings per share (EPS) totalled 2,79 USD, up 19 percent from 2,35 USD a year ago. Adjusted diluted EPS, which excludes certain items affecting comparability of results, totalled 2,69 USD compared to 2,56 USD a year ago.
General Mills Chairman and Chief Executive Officer Ken Powell: «Our 2013 results reflect good growth from established product lines and important contributions from new businesses added during the year. Each of our three operating segments posted profit growth. Our cash flow from operating activities rose 22 percent, and we returned nearly 1,9 billion USD in cash to shareholders through dividends and share repurchase activity. In addition, we exited the year with momentum that enabled us to finish 2013 a bit better than our original estimates».
Fiscal 2013 net sales increased seven percent to 17,8 billion USD. Pound volume contributed nine points of net sales growth, primarily reflecting the addition of new businesses. Net price realization and mix reduced net sales growth by one percentage point. Foreign currency exchange also reduced net sales growth by one point. Gross margin excluding mark-to-market effects was below prior-year levels, reflecting changes in business mix. Advertising and media expense of 895 million USD was two percent below strong year-ago levels. Total segment operating profit increased six percent to 3,2 billion USD. Earnings attributable to General Mills totalled 1,9 billion USD and diluted EPS totalled 2,79 USD. Adjusted diluted earnings per share totalled 2,69 USD compared to 2,56 USD a year ago.
Products making the strongest contributions to U.S. Retail segment net sales growth in 2013 included new items such as Honey Nut Cheerios Medley Crunch cereal, Yoplait Greek 100 calorie yoghurt and Nature Valley Protein Bars, along with established brands including Lucky Charms cereal, Progresso ready-to-serve soups, Fiber One snack bars, Totino´s frozen snacks, and Pillsbury refrigerated baked goods. For the international segment, double-digit growth by Haagen Dazs ice cream and Wanchai Ferry frozen dim sum in China, and the newly acquired Yoki and Kitano brands in Brazil, led the overall sales increase. In the Bakeries and Foodservice segment, items including Chex Mix snack varieties, Pillsbury heat-and-serve breakfast items, and Yoplait Parfait Pro Greek yoghurt made strong contributions to 2013 sales.
Fourth Quarter Results Summary
Net sales for the fourth quarter of 2013 rose eight percent to 4,4 billion USD, with pound volume up eleven percent. Net price realization and mix reduced net sales growth by one percentage point, and foreign exchange reduced sales growth by two points. New businesses contributed seven points of the net sales growth. Excluding new businesses, net sales grew one percent, including two points of pound volume growth. Segment operating profit declined two percent to 722 million USD, primarily reflecting higher input costs and increased in-store merchandising activity compared to the year-ago period. Advertising and media expense was five percent above year-ago levels. Net earnings attributable to General Mills increased 13 percent to 366 million USD and diluted EPS grew to 0,55 USD per share. Adjusted diluted EPS totalled 0,53 USD compared to 0,60 USD a year earlier.
U.S. Retail Segment Results
Fiscal 2013 net sales for General Mills´ U.S. Retail operations grew one percent to 10,6 billion USD, reflecting higher pound volume. The Snacks, Small Planet Foods, Baking Products and Meals divisions led US Retail sales growth for the year. Advertising and media expense was five percent below strong year-ago levels. U.S. Retail segment operating profit rose four percent to 2,4 billion USD.
Fourth-quarter net sales for the U.S. Retail segment grew two percent to 2,5 billion USD. Higher pound volume contributed two points of net sales growth. Segment operating profit totalled 517 million USD, below year-ago levels primarily due to higher input costs and higher levels of in-store merchandising activity compared to the year-ago period.
International Segment Results
Fiscal 2013 net sales for General Mills´ consolidated international businesses grew 24 percent to 5,2 billion USD. Pound volume contributed 34 points of net sales growth, including 32 points from new businesses. Net price realization and mix reduced net sales growth by six percentage points, and foreign-currency translation subtracted four points of net sales growth. Fiscal 2013 international results include 13 months of business results for our Europe region, as part of a long-term plan to conform the fiscal year-ends of all our operations. Fiscal 2012 international results included 13 months for our China operations. These changes in reporting period had no material impact on our consolidated results.
On a constant-currency basis, International segment net sales grew 28 percent overall, with sales up eleven percent in the Asia / Pacific region; sales more than doubling in Latin America including Yoki; 15 percent growth in Europe; and sales up 22 percent in Canada including Yoplait.
International segment operating profit grew 14 percent to 490 million USD including a ten percent increase in advertising and media expense, as well as the negative effects of Venezuelan currency devaluation.
In the fourth quarter, International segment net sales grew 27 percent to 1,4 billion USD. Pound volume contributed 35 points of net sales growth, including 32 points from new businesses. Price realization and mix reduced sales growth by three points, and foreign exchange reduced sales growth by five points. Advertising and media expense grew at a double-digit rate. Segment operating profit grew eight percent to 129 million USD.
Bakeries and Foodservice Segment Results
Fiscal 2013 net sales for the Bakeries and Foodservice segment totalled 2,0 billion USD, slightly below prior-year results due to one percent lower pound volume. Segment operating profit grew ten percent to 315 million USD, and segment operating profit margin expanded to exceed 16 percent.
In the fourth quarter, Bakeries and Foodservice pound volume was down one percent and segment net sales declined two percent to 502 million USD. Segment operating profit of 75 million USD was seven percent lower, primarily reflecting higher manufacturing costs year-over-year.
Joint Venture Summary
Combined after-tax earnings from the Cereal Partners Worldwide (CPW) and Haagen Dazs Japan (HDJ) joint ventures rose twelve percent in fiscal 2013 to reach 99 million USD. Constant-currency net sales grew two percent for CPW and five percent for HDJ. In the fourth quarter, after-tax earnings of 22 million USD increased at a strong double-digit rate from year-ago results that were hindered by a higher tax rate.
Unallocated corporate items represented net expense of 326 million USD in 2013 compared to net expense of 348 million USD in 2012. Excluding the effects of changes in mark-to-market valuation of certain commodity positions, unallocated corporate items totalled 330 million USD net expense this year compared to 243 million USD in 2012. This includes pension expense, which increased 40 million USD in fiscal 2013 compared to 2012.
Restructuring, impairment and other exit costs totalled 20 million USD in 2013 compared to 102 million USD in 2012. Costs in both years are primarily associated with a company-wide productivity and savings plan announced in the fourth quarter of fiscal 2012.
Net interest expense in 2013 totalled 317 million USD, ten percent below prior-year levels due to changes in debt mix. The effective tax rate for 2013 was 29,2 percent. Excluding certain items affecting comparability of results, the effective tax rate was 32,4 percent in 2013 matching last year´s rate. For the fourth quarter, the effective tax rate excluding items affecting comparability was 35,1 percent in 2013 compared to 31,1 percent in 2012.
Cash Flow Items
Cash provided by operating activities totalled 2,9 billion USD in 2013, including a 200 million USD voluntary contribution to the company´s domestic pension plan made during the fourth quarter. Capital investments totalled 614 million USD in 2013. Dividends paid rose eight percent to 868 million USD. General Mills repurchased approximately 24 million shares of common stock in 2013 for a total of 1,0 billion USD. Average diluted shares outstanding in 2013 were 666 million, approximately one million shares lower than the 2012 average balance.
«Our business plans for 2014 include strong levels of innovation on established product lines and a high-quality line-up of new products», Powell said. «We also will have three months of incremental contribution from Yoki and Yoplait Canada. In total, we expect our net sales to grow at a low single-digit rate in 2014 to exceed 18 billion USD».
General Mills said that strong holistic margin management efforts company-wide are expected to offset input cost inflation, estimated at three percent in 2014. The company expects to generate mid single-digit growth in segment operating profit for the year.
Fiscal 2014 adjusted diluted earnings per share are expected to grow at a high single-digit rate, to a range of 2,87 USD to 2,90 USD per share. Planned share repurchases are expected to reduce average net diluted shares outstanding by two percent.
Adjusted diluted EPS, total segment operating profit, international sales excluding foreign currency translation effects, and adjusted effective tax rate are each non-GAAP measures.