General Mills: Reports Strong Results for Q2/2010

Minneapolis / MN. (gm) General Mills Inc. reported record results for the second quarter of fiscal 2010. Fiscal 2010 Second-quarter Financial Highlights:

  • Net sales increased to 4.08 billion USD, led by four percent growth in U.S. Retail sales
  • Segment operating profit increased 13 percent to 880 million USD
  • Diluted earnings per share grew at a strong double-digit rate to 1,66 USD
  • Excluding certain items affecting comparability, earnings per share grew 13 percent to 1,54 USD, exceeding the consensus of analyst estimates.

Net sales for the 13 weeks ended November 29, 2009, grew two percent to 4,08 billion USD, led by four percent growth in U.S. Retail net sales. The comparison was difficult in last year´s second quarter, total company net sales grew eight percent and U.S. Retail net sales grew ten percent. Foreign currency translation contributed one point of net sales growth. The contribution from pound volume was flat, including the loss of two points of growth from divested products. U.S. Retail pound volume grew two percent above last year´s second-quarter level, which was up five percent.

Chairman and Chief Executive Officer Ken Powell: «Consumers around the world continue to focus on nutritious, convenient food choices that help them make breakfast, lunch and dinner for their families at good value. Demand for our leading brands remains strong. These good sales levels, combined with the accumulating benefits of our holistic margin management (HMM) efforts, are continuing to drive terrific operating performance in our manufacturing plants. This strong, fundamental business momentum has enabled us to raise our EPS targets for the full year».

Second-quarter gross margin increased at a double-digit rate, reflecting strong operating performance and commodity costs that were below year-ago levels for the period. General Mills increased its consumer marketing investment during the quarter, including a 37 percent increase in advertising and media expense. Segment operating profit grew 13 percent to 880 million USD. Second-quarter net earnings totaled 566 million USD, including a net gain related to mark-to-market valuation of certain commodity positions. Diluted earnings per share (EPS) totaled 1,66 USD; up from 1,09 USD in last year´s second quarter, which included a net reduction in mark-to-market valuation and a gain on the sale of a business. Excluding the divestiture gain last year and mark-to-market impacts in both years, second-quarter earnings would total 1,54 USD in fiscal 2010; up 13 percent from comparable earnings of 1,36 USD per share in fiscal 2009.

Six-month Financial Results Summary

Through the first six months of fiscal 2010, General Mills net sales grew one percent to 7,60 billion USD. Net sales in last year´s first half grew eleven percent. Foreign currency translation reduced 2010 first-half sales growth by one percentage point. The contribution from pound volume was flat despite the loss of two points of growth from divested products. Segment operating profits increased 16 percent to 1,65 billion USD; including a 27 percent increase in advertising and media investment. Six-month net earnings totaled 986 million USD. Diluted earnings per share totaled 2,91 USD compared to 1,88 USD in last year´s first half. Excluding last year´s divestiture gain and mark-to-market valuation effects in both years, earnings per share would total 2,82 USD for the first half of fiscal 2010, up 22 percent from comparable earnings of 2,32 USD a year ago.

U.S. Retail Segment Results

Second-quarter net sales for General Mills´ U.S. Retail segment rose four percent to 2,89 billion USD. Pound volume contributed two points of the growth. This was solid performance, given that last year´s second-quarter net sales grew ten percent and pound volume contributed five points of that increase. Operating profits for the second quarter grew 13 percent to reach 718 million USD, including a 29 percent increase in advertising and media expense for the period (…). Through six months, U.S. Retail segment net sales rose five percent to 5,31 billion USD. Pound volume growth accounted for two points of the sales increase. Segment operating profits grew 16 percent to 1,36 billion USD.

International Segment Results

Second-quarter net sales for General Mills´ consolidated international businesses grew seven percent to 724 million USD. Foreign currency translation contributed four points of sales growth, and net price realization and mix contributed three points of growth. Pound volume matched year ago levels, including the loss of two points of growth from divested products. International segment operating profits declined three percent, reflecting transactional foreign currency effects on cost of sales and a strong double-digit increase in advertising and media expense.

Through six months, International segment net sales increased one percent to 1,39 billion USD. Net price realization and mix contributed five points of net sales growth. Foreign currency translation reduced the growth rate by three points. Pound volume subtracted one point of net sales growth, including the loss of two points of growth from divestitures. First-half segment operating profits of 147 million USD were eight percent below last year´s first half due to negative foreign currency effects and increased advertising investment.

Bakeries + Foodservice Segment Results

Second-quarter net sales for the Bakeries + Foodservice segment declined 16 percent to 464 million USD, reflecting the absence of divested products and the impact of indexed prices on certain product lines. Pound volume reduced net sales growth by 10ten percentage points, including the loss of eight points of growth from divested products. Segment operating profits grew 32 percent to 85 million USD, reflecting strong plant operating performance and lower input costs.

Through the first half, Bakeries + Foodservice segment net sales declined 16 percent to 897 million USD, reflecting the impact of divestitures and indexed prices on certain product lines. However, segment operating profits through the first six months grew at a strong double-digit rate to 146 million USD.

Info: «General Mills Reports Strong Results for Fiscal 2010 Second Quarter» (complete press release).
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