General Mills Reports Strong Growth in Net Sales, Reveals New Products

Second-quarter net earnings attributable to General Mills grew to $542 million and diluted earnings per share increased to 82 cents. Adjusted diluted EPS, which excludes certain items affecting comparability, grew 13 percent to 86 cents.

20 Dec 2012 --- General Mills has reported results for the second quarter of fiscal 2013. Contributions from new businesses primarily reflect the first three months of consolidated operating results for the Yoki Alimentos business in Brazil and Yoplait Canada.

Net sales for the 13 weeks ended Nov. 25, 2012, grew 6 percent to $4.88 billion. Pound volume contributed 7 points of net sales growth, primarily reflecting the addition of Yoki and Yoplait Canada. Price realization and mix reduced the net sales growth rate by 1 point. Foreign currency exchange had no impact on the rate of net sales growth in the quarter. Gross margin was above year ago levels. Total marketing spending in the quarter was weighted toward in-store promotional support for established brands and new product introductions; advertising and media expense was below strong year-ago levels. Total segment operating profit increased 10 percent to $959 million. Second-quarter net earnings attributable to General Mills grew to $542 million and diluted earnings per share increased to 82 cents. Adjusted diluted EPS, which excludes certain items affecting comparability, grew 13 percent to 86 cents.

Chairman and Chief Executive Officer Ken Powell said the second-quarter results reflected good performance by each of the company’s operating segments. “Our U.S. Retail segment posted gains in pound volume, net sales and operating profit. The Bakeries and Foodservice segment generated strong double-digit operating profit growth. And our International segment recorded good sales and profit growth for established businesses in addition to the incremental contributions from Yoki and Yoplait Canada.”

Products making the strongest contributions to net sales growth in the second quarter included new items such as Yoplait Greek and Greek 100 calorie yogurts, Nature Valley protein bars, Peanut Butter Multigrain Cheerios, Progresso Recipe Starters sauces and, in the United Kingdom, Nature Valley Sweet and Nutty bars. Established brands such as Lucky Charms and Chex cereals, Fiber One 90 calorie snack bars, Totino’s frozen snacks, Pillsbury refrigerated crescent rolls and, in China, Haagen Dazs mooncakes and other ice cream products also contributed strong sales gains.

Through the first six months of fiscal 2013, General Mills sales grew 5 percent to $8.93 billion. Pound volume contributed 8 points of sales growth. Price realization and mix subtracted 2 points of net sales growth and foreign currency exchange reduced net sales growth by 1 point. Segment operating profit increased 8 percent to $1.73 billion. (Please see Note 8 for reconciliation of this non-GAAP measure.) Net earnings attributable to General Mills increased 28 percent to $1.09 billion and diluted EPS rose to $1.64, including a net increase in mark-to-market valuation of certain commodity positions. Adjusted diluted earnings per share totaled $1.52 in the first half of 2013, up 8 percent from $1.41 in last year’s first half (please see Note 8).

Second-quarter net sales for General Mills U.S. Retail segment grew 2 percent to $2.98 billion, reflecting increased pound volume. The Snacks, Small Planet Foods and Meals divisions each recorded net sales gains and Frozen Foods net sales essentially matched prior-year levels. These results offset declines in net sales for the Yoplait, Big G, and Baking Products divisions. Advertising and media expense was 1 percent below strong year-ago levels that grew 6 percent. U.S. Retail segment operating profit rose 9 percent to $723 million.

Through the first six months of 2013, U.S. retail segment net sales increased 1 percent to $5.48 billion and segment operating profits increased 4 percent to $1.30 billion.

Second-quarter net sales for General Mills’ consolidated international businesses grew 19 percent to reach $1.38 billion. Pound volume contributed 26 points of net sales growth, reflecting the addition of Yoki and Yoplait Canada. Price realization and mix reduced net sales growth by 4 points and foreign-currency translation subtracted 3 points of net sales growth. On a constant-currency basis, International segment net sales grew 22 percent overall, with sales more than doubling in Latin America including Yoki, and an increase of 16 percent in Canada including Yoplait. Constant-currency net sales grew 3 percent in Europe, and 8 percent in the Asia / Pacific region. (Please see Note 8 below for reconciliation of this non-GAAP measure). International segment operating profit grew 4 percent to $139 million including a $17 million investment associated with transitioning Yoplait Canada from the former licensee to direct ownership. Excluding this expense, which has been included in the company’s 2013 financial guidance, International segment operating profit would have grown at a double-digit rate.
Through the first six months of 2013, International segment net sales grew 22 percent to $2.47 billion, and segment operating profit increased 24 percent to $265 million.

Second-quarter net sales for the Bakeries and Foodservice segment totaled $516 million, 1 percent below year-ago results. Price realization and mix contributed 1 point of net sales growth, while lower pound volume reduced net sales growth by 2 points. Segment operating profits grew 24 percent in the quarter to $96 million, reflecting lower wheat costs year-over-year, favorable mix, and higher grain merchandising earnings.
Through the first six months of 2013, Bakeries and Foodservice segment net sales declined 2 percent to $987 million, and segment operating profits increased 18 percent to $164 million.

Combined after-tax earnings from the Cereal Partners Worldwide (CPW) and Haagen Dazs Japan (HDJ) joint ventures totaled $33 million in the second quarter, up 14 percent from year-ago levels. Constant-currency net sales for CPW grew 3 percent. Constant-currency net sales for HDJ grew 5 percent. Through the first six months of 2013, after-tax earnings from joint ventures totaled $56 million.

Unallocated corporate items totaled $127 million net expense in this year’s second quarter compared to $155 million net expense a year ago. Excluding the effects of mark-to-market valuation of certain commodity positions in both years, unallocated corporate items totaled $79 million net expense this year compared to $61 million net expense a year ago. The increase primarily reflects higher pension expense.

This year’s second-quarter results included $3 million of restructuring expense related to actions taken in the previous fiscal year. Net interest expense declined to $76 million in the second quarter, reflecting changes in debt mix. The effective tax rate was 32.6 percent, compared to 33.3 percent a year earlier. Excluding certain items affecting comparability, the second quarter effective tax rate was 32.8 percent in 2013 and 33.7 percent in 2012. (Please see Note 8 for reconciliation of this non-GAAP measure).

General Mills said it anticipates fiscal 2013 supply chain inflation will be at the high end of its forecasted 2 to 3 percent range, with the past summer’s drought expected to modestly increase second-half inflation rates. The company’s second-half outlook assumes a higher tax rate than in the first half, reflecting the timing of tax expense for the year. The company also is anticipating possible currency devaluation in Venezuela during the second half of the fiscal year.

“As we move into the second half, the global operating environment remains challenging,” Powell said. “We are working to build on our good performance year-to-date. We’re launching a promising slate of new products in our core U.S. market. And we have strong levels of advertising and in-store merchandising planned to support new and existing products in markets worldwide.”

General Mills increased its guidance for fiscal 2013 adjusted diluted EPS to a range of $2.65 to $2.67, excluding mark-to-market effects, a net tax benefit recorded in the first quarter, and restructuring and integration costs.

In a presentation to analysts, General Mills executives announced the lineup of new product innovation for the second half of the company’s fiscal 2013 year.  Beginning in January, the company will launch dozens of new products across its portfolio to meet consumer needs and drive growth for the company.

“We are committed to driving innovation across all of the categories in which we compete, and are excited about the strong number of differentiated new products we’ll be launching in the back half of our fiscal 2013,” said Ian Friendly, executive vice president and chief operating officer of U.S. Retail. “Across all of U.S. Retail, we will launch 100 new products in our fiscal 2013.

In recent years the company has focused on bigger, more unique new product launches with the goal of better addressing unmet consumer needs, bringing more new consumers to its brands, and driving more profitability for the company.

Over the next several months General Mills will launch products that deliver growth and meet consumer needs in a number of ways, including:
•  Bringing brands to new categories, as with the launch of Green Giant Veggie Chips
•  Expanding brands with new product lines such as Totino’s Pizzeria Rolls or GoGurt Twisted
•  Delivering new consumer benefits to a brand, as with Fiber One Protein
•  Bringing more flavor variety to a successful brand with Honey Nut Cheerios Medley Crunch, Peanut Butter Toast Crunch or Yoplait Greek 100 Tropical Fruit and Lemon flavors.
General Mills products launching in its U.S. Retail and Bakeries and Foodservice channels in January through May of 2013 include:

U.S. Retail:
•  Honey Nut Cheerios Medley Crunch
•  Fiber One 80 Calories Chocolate
•  Peanut Butter Toast Crunch 
•  Fiber One Protein bars in Caramel Nut and Coconut Almond flavors
•  Green Giant Veggie Chips: Sweet Potato Multigrain Chips with sea salt and Roasted Veggie Tortilla Chips
•  Totino’s Pizzeria Rolls in Cheesy Garlic, Chicken Parmesan and Meatball Marinara flavors
•  Yoplait Greek 100 in Tropical Fruit and Lemon flavors
•  GoGurt Twisted in Strawberry Mango and Screamin’ Green Apple flavors
•  Yoplait Pro-Force Greek yogurt for kids in Strawberry Blast and Mixed Berry Burst flavors
•  Nature Valley Protein in Salted Caramel Nut
•  Cascadian Farm Crunchy Granola bars in Oats & Honey, Peanut Butter, and Oats & Cocoa flavors
•  LÄRABAR Cappuccino bars
•  Cascadian Farm Berry Cobbler Granola
•  Chicken Helper Parmesan Crusted Chicken and Sweet & Sour Chicken
•  Betty Crocker Mac and Cheese in Extra Cheesy and Twists varieties
•  Suddenly Salad Southwest Style Ranch

Bakeries and Foodservice:
•  Chex Mix Muddy Buddies Snickerdoodle variety in the Convenience Store channel
•  Yoplait ParfaitPro Greek for foodservice operators
•  Pillsbury Sunrise Flatbread and Pillsbury Mini Muffins for the K-12 Foodservice channel
Recent and upcoming product launches in General Mills’ International division include:
•  Sweet and Nutty bars in the UK in Peanut and Almond flavors
•  New Yoplait and Liberté yogurts in Canada
•  New varieties of Calin yogurt in France 
•  Häagen-Dazs
•  Häagen-Dazs Salted Caramel  ice cream in France
•  Häagen-Dazs Secret Sensations launching in additional markets such as Thailand and Singapore