General Mills: Reports Fiscal 2023 Second-quarter Results

Minneapolis / MN. (gm) General Mills Inc. reported results for its fiscal 2023 second quarter. «We continued to execute well and delivered strong top and bottom-line growth in the second quarter,» said General Mills Chairman and Chief Executive Officer Jeff Harmening. «Amid ongoing volatility in the operating environment, we remain focused on driving our Accelerate strategy by investing in brand building and innovation, strengthening our capabilities, and continuing to reshape our portfolio. With strong first-half results and positive momentum on our business, we are increasing our full-year outlook for organic net sales, adjusted operating profit, and adjusted diluted EPS growth.»

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.

Second Quarter Results Summary

  • Net sales increased 4 percent to USD 5.2 billion, including a 5-point headwind from net divestiture and acquisition activity and 1 point of unfavorable foreign currency exchange. Organic net sales increased 11 percent, driven by positive organic net price realization and mix, partially offset by lower organic pound volume.
  • Gross margin was up 20 basis points to 32.7 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 100 basis points to 33.2 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, higher other cost of goods sold, and supply chain deleverage.
  • Operating profit of USD 800 million essentially matched year-ago levels, reflecting higher gross profit dollars offset by higher selling, general, and administrative (SG+A) expenses. Operating profit margin of 15.3 percent was down 60 basis points. Constant-currency adjusted operating profit increased 7 percent, driven by higher adjusted gross profit dollars, partially offset by higher adjusted SG+A expenses. Adjusted operating profit margin increased 60 basis points to 16.9 percent.
  • Net earnings attributable to General Mills increased 1 percent to USD 606 million and diluted EPS was up 4 percent to USD 1.01, driven by lower net shares outstanding and a lower effective tax rate, partially offset by lower benefit plan non-service income. Adjusted diluted EPS of USD 1.10 increased 12 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 benefit plan non-service income.

Six Month Results Summary

  • Net sales increased 4 percent to USD 9.9 billion, including a 5-point headwind from net divestiture and acquisition activity and 1 point of unfavorable foreign currency exchange. Organic net sales increased 11 percent, driven by positive organic net price realization and mix, partially offset by lower organic pound volume.
  • Gross margin was down 210 basis points to 31.7 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 60 basis points to 34.0 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 1.9 billion was up 15 percent, driven primarily by net gains on divestitures, partially offset by lower gross profit dollars, unfavorable net corporate investment activity, and higher SG+A expenses. Operating profit margin of 19.0 percent was up 180 basis points. Constant-currency adjusted operating profit increased 8 percent, driven by higher adjusted gross profit dollars, partially offset by higher adjusted SG+A expenses. Adjusted operating profit margin increased 50 basis points to 17.7 percent.
  • Net earnings attributable to General Mills increased 16 percent to USD 1.4 billion and diluted EPS was up 19 percent to USD 2.36, primarily reflecting higher operating profit and lower net shares outstanding. Adjusted diluted EPS of USD 2.21 was up 13 percent in constant currency, driven primarily by higher adjusted operating profit, a lower adjusted effective tax rate, and lower net shares outstanding.

Notes on Comparability

Financial results in the first half 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 Q1 of fiscal 2023.

First-half 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 half included an additional USD 24 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 any further material impact from the ice cream recall beyond the first half of fiscal 2023.

For additional information please read the company’s PDF file below (190 KB).

20221221-GENERAL-MILLS-Q2-2022
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