General Mills Profit Falls 28%; Costs Rise Faster Than Prices

The company maintained its full-year outlook and said it expected strong sales and profitability gains in the second half of the fiscal year. However, it cautioned that its gross margins would be lower during that time given continued cost pressures and its recent acquisition of the lower-margin Yoplait.

General Mills, which makes Cheerios cereal, Nature Valley granola and Hamburger Helper, remains one of the most popular food brands in grocery stores. But like most of its peers, it has struggled with higher costs for things as diverse as ingredients and labor. The company forecast cost increases of 10 to 11 percent for the year and has raised its prices to offset that pressure.

Net income was $444.8 million, or 67 cents a share, compared with $613.9 million, or 92 cents a share, in the period a year earlier. Excluding charges tied to its Yoplait deal and other items, earnings were 76 cents a share.

Revenue rose 14 percent, to $4.62 billion.

“We knew it was going to be a tough environment and it is, but the year is shaping up as we anticipated,” said Don Mulligan, the company’s chief financial officer.

The company, based in Minneapolis, reported that its biggest revenue increase was in its international business. General Mills, which already distributed Yoplait products in the United States, announced in July that it was acquiring a controlling stake in the company. This was the first full quarter with the yogurt brand under its ownership, which lifted its international sales 55 percent.

Revenue at the bakeries and food service division increased 12 percent, with strong sales of products like Pillsbury Mini-Pancakes and French Toast. Revenue from the company’s United States retail business increased 3 percent on strong sales of cereal and snacks, but sales of yogurt and some baking products with higher prices were weaker.

For the full year, General Mills still expects adjusted earnings of $2.59 to $2.61 a share; analysts forecast $2.61 a share.

Shares fell 32 cents, or almost 1 percent, to $39.27.

Article source: http://feeds.nytimes.com/click.phdo?i=55495f79ff949e0525c1eba9f1b560fb