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General Mills Profits Recovering: Yogurt Cheerios Burst Onto Breakfast Scene, Helping to Drive Sales

Posted on: Friday, 24 March 2006, 06:00 CST

By Tom Webb, Pioneer Press, St. Paul, Minn.

Mar. 24--After a year of soggy sales, the Big G cereals from General Mills are finally starting to feel their oats. The maker of Cheerios, Wheaties, Chex and Lucky Charms on Thursday reported that its cereal shipments rose 5 percent over last year, its first increase since an unpopular price increase in 2004 caused sales to fall. The growth in General Mills' flagship cereal line contributed to a 7 percent rise in quarterly earnings, to $246 million, as sales at the Golden Valley-based food company rose 3 percent to $2.86 billion. The company beat analysts' expectations by 3 cents a share.

"We were unhappy with where we were, we changed course, and we're moving now in the right direction," Chief Financial Officer Jim Lawrence told analysts. Still, he added, there's room for improvement. General Mills is the nation's No. 2 cereal maker, with about 30 percent of the U.S. market. Successful new products and a double-digit increase in its advertising budget have helped turn things around, officials said. One bright spot was Yogurt Burst Cheerios, which made its debut in November 2005. Already, it has captured more than 1 percent of the $9-billion-a-year U.S. breakfast cereal market, making it one of the company's most successful cereal launches in recent years. Progresso soup, Yoplait yogurt, Nature Valley granola bars and Pillsbury crescent rolls all enjoyed large sales increases during the quarter, the company said. Other areas faced tougher times, including fruit snacks, overseas sales of Haagen-Daz ice cream and the company's food service business. Weighing on earnings was the rising cost of employee benefits, freight and consumer marketing, the company said. The company said it was on track to meet its full year earnings targets of $2.80 to $2.85 a share. Shares of General Mills closed up 25 cents to $50.23. Tom Webb can be reached at twebb@pioneerpress.com or 651-228-5428. GENERAL MILLS Third Qtr. ended Feb. 26 (in thousands, except per share) 2006 2005 Revenue $2,860,000 $2,772,000 Net Inc. $246,000 $230,000 Per Share $0.68 $0.58 Nine Months Revenue $8,795,000 $8,525,000 Net Inc. $868,000 $780,000 Per Share $2.29 $1.94

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Copyright (c) 2006, Pioneer Press, St. Paul, Minn.

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Source: Saint Paul Pioneer Press (St. Paul, Minn.)

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