General Mills reports fiscal 2014 third-quarter results
Today General Mills reported financial results for the third quarter of fiscal 2014.
On this morning’s live webcast, Ken Powell, chairman and CEO, Don Mulligan, executive vice president and chief financial officer, and Ann Simonds, senior vice president and president of Baking Products, discussed the company’s results and provided a look ahead to the fourth quarter.
The full financials are outlined in a press release , which was issued this morning and is available on GeneralMills.com.
In the 2014 third quarter:
-Net sales of $4.38 billion were one percent below year-ago levels.
-Adjusted segment operating profit of $690 million was down 10 percent, excluding the impact of Venezuela devaluation last year.
-Diluted earnings per share (EPS) totaled 64 cents, up 7 percent from the prior year.
-Adjusted diluted EPS, which excludes certain items affecting comparability, totaled 62 cents, compared to 66 cents in last year’s third quarter.
U.S. Retail: Q3 Investment in Yogurt
Results for U.S. Retail in the third quarter were impacted by significant investment in General Mills’ yogurt business.
“During this period we put our foot down on the gas pedal, with incremental investment on this business,” said Ken Powell, chairman and CEO.
During the third quarter, the company introduced 16 new yogurt products.
And in January, the business launched the Yoplait Greek Taste-Off, a national advertising and marketing campaign that emphasizes the taste superiority of Yoplait Greek over the leading blueberry Greek yogurt. Yoplait also opened a pop-up store in New York City, where consumers were able to judge this difference for themselves.
You can read more about the Yoplait Greek Taste-Off in this blog post.
Ken stated that since January, Greek varieties have gained dollar share nearly every week versus last year, reaching over 10 percent of the Greek segment in the most recent period.
Original-style Yoplait has returned to growth, with retail dollar sales up for virtually every week in the calendar year to-date. And Yoplait Light is gaining share in the light yogurt segment.
U.S. Retail Innovation
General Mills is also seeing growth on several of its key product platforms.
In the cereal category Big G net sales were up 1 percent in the third quarter and 2 percent fiscal year-to-date. Retail sales for the baking division grew 4 percent in the third quarter. And new products, including Nature Valley Breakfast Biscuits and Fiber One Meal Bars are driving 10 percent retail sales growth in grain snacks so far this year.
Another standout is Old El Paso Mexican foods, with retail sales up 4 percent fiscal year to-date in the Mexican aisle. The new Old El Paso frozen entrees, launched last September, are on track to deliver $50 million in retails sales in their first year.
“For the U.S. Retail segment in total, we expect category topline trends to improve gradually as the calendar year unfolds,” said Ken. “And we expect to show a strong profit increase in the fourth quarter.”
International Segment: Strong sales in China and Latin America
The International segment is continuing to grow in both developed and emerging markets. Net sales are up 11 percent fiscal year-to-date on a constant-currency basis. And in the third quarter, all four regions saw constant-currency net sales gains.
In Canada, Liberté and Yoplait yogurt are driving growth in the Greek yogurt segment. In China, Haagen-Dazs ice cream and Wanchai Ferry frozen foods are fueling constant currency net sales, which are up 13 percent so far this year. And Latin America sales were up by double digits in the most recent quarter.
Constant-currency net sales for Cereal Partners Worldwide (CPW), our joint venture with Nestlé, are up 1 percent so far this year, with growth on brands like Lion in Europe, Chocapic in Asia and Shreddies in the UK.
Many new products are starting to roll out in the International segment including new Haagen-Dazs Triple Sensations ice cream treats in the UK, and a co-branded Yoki and Betty Crocker line of baking mixes in Brazil.
Convenience Stores & Foodservice Segment: Year-to-date growth in key categories
The harsh winter weather closed schools and kept people from visiting restaurants, impacting the Convenience Stores and Foodservice division in the third quarter. However, the business is seeing growth in several key product categories through the first nine months.
Net sales for snacks are up 4 percent fiscal year-to-date driven by good performance in convenience stores.
And Yoplait Parfait Pro has helped increase net sales for yogurt 10 percent.
Frozen breakfast products are up 23 percent so far this year with new innovations such as Old El Paso breakfast burritos.
General Mills continues to generate strong cash flows, a key component of the company’s long-term shareholder return model.
“We are leveraging our robust cash flow to increase our cash returns to shareholders this year,” said Don.
Through nine months, General Mills has returned 50 percent more cash to shareholders through dividends and share repurchases than the same time last year.
Just last week, General Mills’ board of directors declared an 8 percent increase in the quarterly dividend, payable May 1, 2014, which will result in a 17 percent increase in dividends per share for the full fiscal year.
For more information about last week’s dividend announcement, read this blog post.
While the third quarter reflected some clear external headwinds along with increased marketing and merchandising investment in U.S. yogurt, Ken closed today’s call stating the company expects strong earnings growth in the fourth quarter. He said the company expects an adjusted diluted EPS for fiscal 2014 in total between $2.87 and $2.90 per share.
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. Also, learn more about our Baking Products division in this blog post, also published today.
Editor’s Note: This post contains non-GAAP financial information and forward-looking statements regarding future results. Please see our press release dated March 19, 2014, for a reconciliation of these non-GAAP measures and for risk factors that could affect the results anticipated in these forward-looking statements.