Minneapolis / MN. (gm) General Mills Inc. reported results for the second quarter and first half of fiscal 2012. Net sales for the 13 weeks ended November 27, 2011, grew 14 percent to 4,62 billion USD. Price realization and mix contributed three points of sales growth, and foreign exchange contributed one point of growth. Pound volume contributed ten points of growth, including 14 points of growth from the Yoplait acquisition. Gross margin as a percent of net sales was below year-ago levels due to higher input costs and the change in business mix to include the Yoplait acquisition. Advertising and media expense increased eight percent in the period. Segment operating profit grew two percent to 873 million USD. Second-quarter net earnings attributable to General Mills totalled 445 million USD and diluted earnings per share totalled 0,67 USD. Adjusted diluted earnings per share, which excludes the effects of mark-to-market valuation of certain commodity positions in both fiscal 2012 and 2011, Yoplait integration costs in 2012, and a net benefit from certain tax matters in 2011, totalled 0,76 USD for the second quarter in each year.
Chairman and Chief Executive Officer Ken Powell: «General Mills second-quarter results show good net sales growth worldwide. Our Yoplait acquisition fuelled a more than 50 percent increase in total international sales. Strong levels of net price realization and product innovation drove sales increases for our established International operations, and for our Bakeries and Foodservice and U.S. Retail business segments. Significantly higher input costs pressured our margins, as expected. But in total, performance for the quarter and year-to-date has us on track to meet the key financial targets we have set for fiscal 2012».
Six-month Financial Summary
Through the first six months of fiscal 2012, General Mills net sales grew twelve percent to 8,47 billion USD, including six points of growth from the international Yoplait acquisition. Price realization and mix contributed five points of net sales growth, and foreign exchange contributed one point of growth. Pound volume contributed six points of net sales growth, including ten points of growth from the Yoplait acquisition. Segment operating profit of 1,6 billion USD essentially matched year-ago levels. Net earnings attributable to General Mills totalled 850 million USD and diluted EPS totalled 1,28 USD. Adjusted diluted earnings per share, which excludes mark-to-market effects, Yoplait integration costs, and the net tax benefit a year ago, totalled 1,41 USD for the first half of 2012 compared to 1,40 USD in the first half of 2011.
U.S. Retail Segment Results
Second-quarter net sales for General Mills´ U.S. Retail segment grew three percent to 2,94 billion USD. Pound volume reduced net sales growth by seven points, primarily reflecting lower shipments of items such as flour and dessert mixes, canned and frozen vegetables, and yoghurt. Price realization and mix contributed ten points of net sales growth in the quarter. Segment operating profit of 661 million USD was four percent below prior-year levels, reflecting higher input costs and a six percent increase in advertising and media expense.
Net sales for Big G cereals grew one percent, including gains from established brands such as Honey Nut Chex and Cinnamon Toast Crunch, and good contributions from new products including Cinnamon Burst Cheerios and Fiber One 80 Calorie cereal. Net sales for the Snacks division grew 20 percent led by Fiber One and Nature Valley snack bar varieties. Sales for the Pillsbury division grew nine percent with good contributions from Totino´s frozen snacks and pizza, Pillsbury refrigerated baked goods, and new Pillsbury frozen breakfast items. Sales for the Baking Products division grew two percent, reflecting strong net price realization. Meals division net sales were two percent below year-ago levels reflecting lower volume for several product lines, including canned vegetables, frozen entrees, and potato mixes. Yoplait division net sales were six percent below year-ago levels as growth from Go-Gurt, Yoplait Greek and Mountain High yoghurt was offset by declines on several established product lines. Net sales for Small Planet Foods increased 17 percent led by Cascadian Farm cereals and Larabar fruit and nut energy bars.
Through six months, U.S. Retail net sales grew three percent to 5,45 billion USD. Pound volume reduced net sales growth by six points, while price realization and mix contributed nine points of growth. Segment operating profit declined four percent through the first half to 1,25 billion USD.
International Segment Results
Second-quarter net sales for General Mills´ consolidated international businesses grew 55 percent to reach 1,16 billion USD, including 43 points of net sales growth from the Yoplait acquisition. Pound volume contributed 80 points of net sales growth, including 76 points of growth from the Yoplait acquisition. Price realization and mix subtracted 27 points of sales growth, while foreign currency exchange contributed two points of growth. On a constant-currency basis, International segment net sales grew 53 percent overall, with sales more than doubling in Europe, and gains of 37 percent in Canada, 20 percent in Latin America and 16 percent in the Asia / Pacific region. Advertising and media expense grew 17 percent in the second quarter. International segment operating profit totalled 134 million USD, up 50 percent from year-ago levels.
Through six months, International segment net sales grew 43 percent to 2,02 billion USD, including 30 points of growth from the Yoplait acquisition. Pound volume contributed 55 points of growth, foreign exchange contributed six points, and price realization and mix subtracted 18 points. Segment operating profit grew 42 percent to 214 million USD.
Bakeries + Foodservice Segment Results
Second-quarter net sales for the Bakeries and Foodservice segment grew twelve percent to 522 million USD. Pound volume contributed three points of net sales growth, and price realization and mix contributed nine points of growth. Customer channel performance was strong with net sales to convenience stores up 14 percent, sales to foodservice distributors up eleven percent, and sales to bakeries and national restaurant accounts up twelve percent. Segment operating profit of 78 million USD was consistent with year-ago levels.
Through the first half of fiscal 2012, net sales for Bakeries and Foodservice increased twelve percent to 1,00 billion USD. Pound volume contributed one point of net sales growth, with price realization and mix generating the rest of the sales increase. Segment operating profit totalled 139 million USD, seven percent below year-ago levels due to significantly higher input costs and lower grain merchandising earnings.
Joint Venture Summary
After-tax earnings from the Cereal Partners Worldwide (CPW) and Haagen Dazs Japan (HDJ) joint ventures totalled 29 million USD, down from 35 million USD a year ago primarily due to higher input costs for CPW. Net sales for CPW grew one percent in the period and net sales for Haagen Dazs Japan were two percent above year-ago levels. Through the first six months of fiscal 2012, after-tax earnings from joint ventures declined six percent to 57 million USD, as good net sales growth was offset by higher input costs.
Second-half and Full-year Outlook
The company´s guidance for the second half of fiscal 2012 calls for double-digit growth in net sales and high single-digit to low double-digit growth in adjusted diluted earnings per share. «Our net sales in the second half will continue to reflect the significant addition of international Yoplait revenues. We also expect our base business to show good sales growth, fuelled by strong levels of product innovation and consumer marketing support», Powell said. The company expects its second-half gross margin as a percent of sales will be below year-ago levels, reflecting the shift in business mix to include the Yoplait acquisition as well as the continued pressure of higher input costs year-over-year. Second-half segment operating profit is expected to be above year-ago levels, including a planned increase in advertising and media investment.
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