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Jun 25, 2014 • By

General Mills reports fiscal 2014 earnings

This morning General Mills (NYSE: GIS) announced earnings for the fourth quarter and for fiscal 2014, which ended May 25, 2014.

In the press release, General Mills Chairman and Chief Executive Officer Ken Powell said, “Our plans for 2014 called for sales and earnings growth consistent with our long-term business model, along with increased cash returns to shareholders. We made good progress building our worldwide food businesses, and we returned more than $2.7 billion in cash to shareholders through a 17 percent dividend increase and significant share repurchase activity.

“But our sales and operating profit performance was disappointing,” Ken added. “In the fourth quarter, promotional spending in developed markets was less effective than we planned and input cost inflation was a bit above our forecast. Net sales and adjusted gross margin fell short of our targets.”

Here is a quick overview of the numbers:

Fiscal 2014 Results Summary

• Net sales grew 1 percent to $17.9 billion (2 percent in constant currency).

• Adjusted segment operating profit totaled $3.2 billion, down 2 percent from year-ago results.

• Diluted earnings per share (EPS) totaled $2.83, up 1 percent from $2.79 a year ago. Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $2.82, up 4 percent compared to $2.72 a year ago, but fell short of guidance and expectations communicated in March.

Fourth Quarter Results Summary

• Fourth quarter EPS totaled 65 cents per share, up 18 percent from 55 cents a year ago. Adjusted diluted EPS of 67 cents was up 24 percent from 54 cents in last year’s fourth quarter.

• A significantly lower tax rate and lower shares down 5 percent outstanding were strong contributors to EPS growth in the fourth quarter. These results also include a 6-cent per share gain on the sale of several Idaho grain elevators that helped offset a 9-cent per share charge associated with Venezuelan currency devaluation

• Net sales totaled $4.3 billion, 3 percent below year-ago results.

• Adjusted segment operating profit of $733 million essentially matched year-ago levels.

More information and details about the full financials are outlined in this press release.

Also this morning, our Chairman and CEO Ken Powell and CFO Don Mulligan conducted a call with analysts to discuss results for the year and plans for Fiscal 2015. A replay of this morning’s webcast will be available on the Investor section of GeneralMills.com.

Below are some of the highlights of what was said on this morning’s call:

CFO Don Mulligan on Shareholder Value:

“Fiscal 2014 was a good year for General Mills shareholders. The combination of share price appreciation and dividends resulted in a 13 percent total return for the year, consistent with our goal of delivering double-digit shareholder returns.”

“We returned more than $2.7 billion dollars of cash to shareholders through stock buybacks and dividends in fiscal 2014. Dividends per share increased by 17 percent. The current annualized rate of $1.64 per share represents a yield of 3 percent at recent prices for GIS stock.”

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“We have a strong track record of returning cash to shareholders. In recent years, our dividends per share have increased at a 13 percent compound rate. And our average shares outstanding have declined 1 percent per year – that’s despite pausing briefly on share repurchases to fund the strategic acquisitions of Yoplait and Yoki.”

Chairman and CEO Ken Powell on Plans for Fiscal 2015:

“As we move into fiscal 2015, our number one priority is to accelerate topline growth. We’ll do that by sharpening our consumer-first mindset, with particular focus on four growing consumer groups: the growing middle class in emerging markets, and multicultural families, Millennials, and consumers over age 55 in the U.S. With these growing consumer groups – and our broad portfolio – there are plenty of growth opportunities. It’s our plan to go out and get them.”

“We’re maintaining our strong Holistic Margin Management (HMM) focus, and we’ve launched new efforts designed to contribute $40 million dollars in pretax savings this year – with more to come in fiscal 2016. And above all, we are focused on our commitment to deliver earnings growth and strong cash returns to our shareholders.”

Ken Powell on U.S. Retail Plans

“Our priorities for U.S. Retail in Fiscal 2015 include investing in our cereal business for growth, returning our U.S. yogurt business to growth, accelerating our strong performance in better-for-you snacking, leveraging the good momentum we have in our Totino’s hot snacks, Old El Paso Mexican products and refrigerated dough, and continuing to foster our strong culture of HMM.”

“We have a robust slate of product news, renovation and innovation that we’re bringing across each of our business segments.”

Cheerios Protein CinnAlmond

Some of the new products Ken mentioned include Cheerios Protein, LARABAR RENOLA, gluten-free Chex hot oatmeal, new flavors of Yoplait Greek 100 and a line of 2 percent fat Yoplait Greek yogurts, Fiber One Streusel bars and cookies, Nature Valley Fruteria bars, Pillsbury Melts filled cookies, new Bold flavors of Totino’s hot snacks, new chocolate varieties of LARABAR ALT bars, Food Should Taste Good pita puffs and brown rice crackers, among others.

Ken Powell on International Plans

“Plans call for high single-digit constant-currency growth in net sales and operating profit in 2015. Our consumer-first approach is as important in our international business as it is in the U.S.”

Among the new products Ken mentioned debuting in our developed and emerging international markets include Cheerios Ancient Grains cereal in Canada, new Häagen-Dazs Triple Sensations ice cream in Europe, new varieties of Liberte Greek yougurt in the U.K. and new flavors of Yopa! high-protein yogurt in France. In China, Wanchai Ferry will introduce new varieties of dumplings and crystal tangyuan and in Latin America, Yoki will bring to market new snacks in “world flavors”.

yoki potato chips

Cereal Partners Worldwide will add Fitness Chocolate to its market-leading brand portfolio in Southeast Asia. (Related post: “How we sell our cereal around the world”)

Ken Powell on Convenience Stores & Foodservice Plans

“McDonald’s recently announced they will be offering Yoplait Go-GURT in Happy Meals at more than 14,000 locations across the U.S. starting in July.

Go-GURT-McDonalds-1

We’ve developed new snacking products for the K-12 channel – like Nature Valley Crisps and Simply Chex – that meet the USDA’s new snack nutrition regulations. And we’ll continue to drive growth in the convenience store channel with innovation like Chex chips and Totino’s Pizza chips.”

Notes on Fiscal 2015 from CFO Don Mulligan

Because General Mills now generates 35 percent of our sales and a meaningful share of our profit outside the U.S., we expect this international weighting to grow in the years ahead. So we’ve transitioned to providing our guidance going forward in constant currency.

General Mills’ fiscal 2015 includes a 53rd week, worth roughly 2 points of topline growth. The company plans to reinvest the profit benefit of that extra week in projects to support increased media spending and start-up expenses related to several key fiscal 2016 product launches.

The company also will continue to generate cost savings and reinvestment funds from its robust pipeline of HMM initiatives. General Mills is targeting more than $400 million dollars in HMM, which will largely offset inflation, estimated at 3 percent in fiscal 2015. Further, the company is beginning work on new cost-reduction initiatives targeted to generated $40 million dollars in pre-tax savings in fiscal 2015 with additional savings in fiscal 2016.

The new fiscal year will also bring continued cash returns to shareholders through share buybacks. In May, our Board approved a new 100 million share repurchase authorization, with no expiration. We are targeting a 3 to 4 percent net reduction in average shares outstanding for Fiscal 2015.

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Upcoming Investor Day Event

General Mills executives will be sharing more news about our line-up of new product innovation and detail plans for Fiscal 2015 at the company’s Investor Day at the New York Stock Exchange on July 8.

Check back with A Taste of General Mills for coverage of that event. A webcast of our Investor Day also will be available on the Investors page 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 June 25, 2014, for a reconciliation of these non-GAAP measures and for risk factors that could affect the results anticipated in these forward-looking statements.