Minneapolis / MN. (gm) General Mills Inc. reported results for the third quarter ended February 28, 2021. «We continued to execute well and delivered profitable growth in the third quarter,» said General Mills Chairman and Chief Executive Officer Jeff Harmening. «We’ve made good progress on our fiscal 2021 priorities, including competing effectively, fueling investment in our brands and capabilities, and reducing our leverage. With our balance sheet in a strong position, we have resumed share repurchase activity in the fourth quarter. We’re continuing to advance our Accelerate strategy, including yesterday’s announcement of our proposed divestiture of our European Yoplait business. Looking ahead, we remain focused on strengthening our momentum and emerging from the pandemic a stronger company, even better positioned to drive long-term shareholder value.»
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 being a force 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, including the proposed divestiture of its European Yoplait operations, to further enhance its growth profile.
General Mills expects that changes in consumer behaviors driven by the Covid-19 pandemic will result in ongoing elevated consumer demand for food at home, relative to pre-pandemic levels. These changes include more time spent working from home and increased consumer appreciation for cooking and baking. The company plans to capitalize on these opportunities, addressing evolving consumer needs through its leading brands, innovation, and advantaged capabilities to generate profitable growth.
Proposed Divestiture of European Yoplait Operations
General Mills announced yesterday that it entered into a memorandum of understanding to sell its 51 percent controlling interest in its European Yoplait operations to Sodiaal, a leading French dairy cooperative, in exchange for full ownership of the Canadian Yoplait business and a reduced royalty rate for use of the Yoplait and Liberté brands in the United States and Canada. This growth- and margin-accretive transaction advances General Mills’ portfolio reshaping efforts within its Accelerate strategy. The proposed transaction is expected to close by the end of calendar 2021, subject to appropriate labor consultations, regulatory filings, and other customary closing conditions.
Third Quarter Results Summary
- Net sales increased 8 percent to USD 4.5 billion and organic net sales were up 7 percent, reflecting broad-based market share gains amid elevated at-home food demand resulting from the Covid-19 pandemic.
- Gross margin increased 80 basis points to 34.4 percent of net sales, driven by favorable net price realization and mix and lower mark-to-market expenses, partially offset by higher input costs. Adjusted gross margin decreased 90 basis points to 33.0 percent of net sales, driven by higher input costs, including input cost inflation, costs to secure incremental capacity, and higher logistics costs, partially offset by favorable net price realization and mix.
- Operating profit of USD 827 million was up 27 percent, primarily driven by higher gross profit dollars and a net gain on investment activity, partially offset by higher selling, general, and administrative (SG+A) expenses. Operating profit margin of 18.3 percent increased 270 basis points. Adjusted operating profit of USD 716 million increased 5 percent in constant currency, driven by higher constant-currency adjusted gross profit dollars, partially offset by higher SG+A expenses, including higher investment in capabilities and media. Adjusted operating profit margin decreased 30 basis points to 15.8 percent.
- Net earnings attributable to General Mills increased 31 percent to USD 596 million and diluted EPS increased 30 percent to USD 0.96, primarily reflecting higher operating profit, partially offset by higher average diluted shares outstanding. Adjusted diluted EPS totaled USD 0.82, up 6 percent in constant currency, primarily driven by higher adjusted operating profit and lower net interest expense, partially offset by higher average diluted shares outstanding.
Nine Month Results Summary
- Net sales increased 8 percent to USD 13.6 billion and organic net sales also increased 8 percent, reflecting positive pound volume and favorable net price realization and mix.
- Gross margin increased 120 basis points to 35.8 percent of net sales, driven by favorable net price realization and mix, lower mark-to-market expenses, and lower restructuring charges recorded in cost of sales, partially offset by higher input costs. Adjusted gross margin increased 10 basis points to 34.9 percent of net sales, driven by favorable net price realization and mix, partially offset by higher input costs.
- Operating profit of USD 2.6 billion increased 22 percent, primarily driven by higher gross profit dollars, partially offset by higher SG+A expenses, including higher media investment. Operating profit margin of 19.1 percent was up 220 basis points. Adjusted operating profit of USD 2.4 billion increased 11 percent in constant currency, driven by higher constant-currency adjusted gross profit dollars, partially offset by higher SG+A expenses, including higher investment in media and capabilities. Adjusted operating profit margin increased 50 basis points to 17.7 percent.
- Net earnings attributable to General Mills increased 24 percent to USD 1.9 billion and diluted EPS of USD 3.10 increased 22 percent, primarily reflecting higher operating profit, higher after-tax earnings from joint ventures, and lower net interest expense, partially offset by a higher effective tax rate and higher average diluted shares outstanding. Adjusted diluted EPS of USD 2.88 was up 14 percent in constant currency, primarily driven by higher adjusted operating profit, higher after-tax earnings from joint ventures, and lower net interest expense, partially offset by higher average diluted shares outstanding and a higher adjusted effective tax rate.
For additional information please read General Mills’ PDF file below (139 KB).
20210324-GENERALMILLS-Q3-2021.