Earnings-Graphic
Dec 18, 2013 • By

General Mills reports fiscal 2014 second-quarter results

This morning General Mills reported financial results for the second quarter of fiscal 2014 and revealed strong marketing and innovation plans for the remainder of the fiscal year.

The full financials are outlined in the press release issued this morning and available on GeneralMills.com.

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Here’s an overview of General Mills fiscal 2014 second-quarter results:

-Net sales of $4.88 billion essentially matched year-ago results

-Segment operating profit of $920 million was 4 percent below strong year-ago results

-Diluted EPS totaled $0.84. Adjusted diluted EPS was $0.83

-Net sales for the U.S. Retail segment declined 1 percent, grew 2 percent in the International segment, and declined 2 percent for the Convenience Stores and Foodservice segment

“The second quarter was a difficult comparison to strong prior-year sales and earnings results for our businesses,” said Ken Powell, General Mills chairman and CEO.

In last year’s second quarter, net sales grew 6 percent, segment operating profit grew 10 percent and adjusted diluted EPS grew 13 percent.

The company also noted that the U.S. holiday of Thanksgiving occurred after the company’s second quarter closed this year, while the prior-year’s second-quarter results did include the holiday.

“As we enter the second half of fiscal 2014, we expect our earnings growth to accelerate from first-half levels,” said Ken. “We like our 2014 innovation and marketing plans, which include a strong slate of new items being introduced in the second half of the year.”

Ken, along with Don Mulligan, executive vice president and CFO, and Ian Friendly, executive vice president and chief operating officer for U.S. Retail, participated in a live webcast this morning to discuss the company’s results and provide an update on plans for the back half of General Mills’ fiscal 2014.

Increasing Returns to Shareholders

Don noted that the company is increasing cash returns to shareholders this year. “Through the first half, we’ve paid $490 million in dividends, reflecting the 15 percent increase per share that went into effect in August,” he said. “This is our 115th consecutive year of dividend payments without reduction or interruption.”

During the first six months of the fiscal year, General Mills has repurchased approximately 18 million shares of common stock for a total of $864 million, and average diluted shares outstanding are down two percent from the prior year.

U.S. Retail

“Our U.S. Retail businesses continue to face a challenging operating environment, but we believe our categories and our leading brands as well-positioned for growth,” said Ian.

U.S. Retail’s Snacks, Small Planet Foods and Big G divisions each contributed net sales growth in the quarter.

In the U.S. ready-to-eat cereal category, Ian emphasized that Big G has led growth for several years and gained share through the first half of fiscal 2014. “We plan to drive growth in the second half with continuing product news and innovation.”

General Mills continues to lead growth in the grain snacks category in the U.S. and, over the past five years, has added almost ten points of market share. Through the first-half of fiscal 2014, strong new product innovation from Fiber One and Nature Valley has driven a gain of nearly four more share points and retail sales gains of 11 percent.

Ian noted that the Small Planet Food division’s natural and organic snacking products have also done well, with double-digit retail sales growth so far this year.

Across all of U.S. Retail, General Mills will launch more than 50 new items in the second half of the fiscal year, including Fiber One Protein cereal and Nature Valley Breakfast Biscuits.

I asked Ian to share more about the U.S. Retail division’s innovation plans for the back half of the year.

Ian also noted that, for the first time in the brand’s history, a Cheerios commercial will run on TV’s biggest stage during the big game in February. Learn more about the campaign in this post, here on our blog.

Convenience Stores and Foodservice

General Mills’ Convenience Stores and Foodservice segment continues to focus on the fastest-growing channels and on higher-margin, priority business platforms, such as snacks, where net sales are growing at a 3 percent pace through the first half of the fiscal year.

“We believe we’re well-positioned with the right products in the right channels to continue good growth for our foodservice business,” said Ken.

ChexChips Wasabi

Plans for this business in the remainder of fiscal 2014 include introducing Chex Chips in Convenience Stores, Parfait Pro Max for Foodservice operators, and an Old El Paso Fold ‘N Go breakfast offering in the K-12 Schools channel.

International

On a constant-currency basis, International segment net sales rose 5 percent in the second quarter, led by the Latin America and the Asia-Pacific regions. Ken also provided an update on this business during the webcast.

Highlights include:

-In Canada, good performance on Yoplait and Liberté yogurt drove first-half constant-currency net sales growth of 11 percent

-In Brazil, General Mills celebrated the one-year anniversary of the Yoki acquisition. Yoki brands are outpacing category growth. “We see great prospects for future growth in the Latin America region,” Ken said.

Yoki

-In China, first-half net sales grew double-digits on a constant-currency basis, including sales gains in constant-currency of 12 percent for Häagen-Dazs ice cream and 13 percent for Wanchai Ferry

Products launching in the second half of the year in the International division include:

-New flavors of Häagen-Dazs ice cream in Europe, including Champagne Truffle pints and Chocolate Caramel Cone in shops

-New flavors of Yopa! and Source Greek yogurts in Canada

-New varieties of Yoki popcorn and soups and regional variations of Farofa side dishes in Brazil

General Mills reaffirmed its guidance for fiscal 2014 adjusted diluted EPS of between $2.87 and $2.90, but noted that foreign currency effects are now expected to be a greater headwind than originally estimated. Possible devaluation of the Venezuelan bolivar would likely reduce EPS to the low end of the company’s guidance range.

For the full webcast and presentation slides from today’s earnings announcement, including the highlights on how each of General Mills’ business segments performed, visit the Investor section of GeneralMills.com.

Editor’s Note: This post contains non-GAAP financial information and forward looking statements regarding future results. Please see our press release dated Dec. 18, 2013 for a reconciliation of these non-GAAP measures and for risk factors that could affect the results anticipated in these forward looking statements.