• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

General Mills 2Q Profit, Revenue Rise

Posted on: Wednesday, 19 December 2007, 12:00 CST

By STEVE KARNOWSKI

MINNEAPOLIS - Food maker General Mills said Wednesday its profit edged up in the second quarter as higher sales helped offset rising ingredient costs, expenses from a pizza recall and more spending on marketing.

The company that makes Cheerios cereal and Yoplait yogurt earned $390.5 million, or $1.14 per share, for the quarter ended Nov. 25, versus $385.4 million, or $1.08 per share, in the year-ago period.

Revenue climbed 7 percent to $3.70 billion from $3.47 billion a year earlier on strength across all segments.

Analysts polled by Thomson Financial expected net income of $1.13 per share on sales of $3.62 billion. The earnings estimates typically exclude one-time items.

Golden Valley-based General Mills Inc. maintained its 2008 profit outlook of $3.39 to $3.43 per share. Analysts were expected full-year earnings of $3.45 per share on revenue of $13.01 billion.

In a conference call with analysts, CEO Ken Powell said General Mills expects continued good results in the second half that will offset rising costs and allow the company to meet its targets for the year, fueled by new products, price increases and ongoing efforts to build its brands, as well as solid consumer spending.

"Our key challenge will continue to be input costs," Powell said. "They're coming in higher than planned and almost all of the added costs will fall in our second half."

Powell said General Mills' original plan for fiscal 2008 estimated that costs for ingredients and energy would rise 5 percent, but commodity prices increases have exceeded the company's estimates. The company now expects input cost inflation of roughly 7 percent.

That's "a significant increase in cost pressure," he acknowledged, but said the good first-half results offset some of the added costs, and the company is planning additional pricing and productivity moves to counter cost pressures in the second half.

Much of the anticipated increase in commodity prices has already been covered by hedging, Chief Financial Officer Don Mulligan told analysts.

General Mills said the voluntary recall it announced last month of all pepperoni varieties of Totino's and Jeno's frozen pizzas due to possible bacterial contamination cost it $20 million. Expenses related to the recall lowered results by 4 cents per share.

U.S. retail revenue grew in the second quarter to $2.52 billion from $2.44 billion with solid results from the Yoplait division and Nature Valley snacks, while international sales increased to $665.7 million from $544.6 million on strength in Latin America. Bakeries and foodservice revenue climbed to $516.7 million from $480.3 million due to price increases implemented to offset rising input costs.

For the first half, earnings were $679.4 million, or $1.95 per share, up from $652.3 million, or $1.81 per share, in the first half last year. Sales totaled $6.78 billion, compared with $6.33 billion a year ago.

---

On the Net:

General Mills Inc.: http://www.generalmills.com

Source: Associated Press/AP Online

More News in this Category