General Mills Beats Expectations on New Businesses
General Mills (NYSE: GIS) reported fiscal third quarter 2013 earnings pre-market Wednesday and beat analyst expectations.
The company reported third quarter EPS of $0.60, beating estimates of EPS of $0.58, and shares rose slightly in the pre-market.
On a GAAP basis, General Mills reported third quarter EPS of $0.60, beating expectations of $0.58 on sales of $4.43 billion, also better than estimates at $4.36 billion. On a non-GAAP basis, General Mills EPS was actually $0.64, rising from last year's comparable number of $0.55.
Sales grew eight percent in the third quarter from the same period a year ago to $4.43 billion. However, the company reported that six percentage points of the eight percent, or 75 percent of the total sales growth, came from new businesses and not from increases sales of legacy businesses. The remaining two percentage points were split between volume sales growth of legacy businesses and price increases.
Chairman and Chief Executive Officer Ken Powell said the third-quarter results reflected gains across the company's worldwide operations. "Our sales and volume growth reflects contributions from new businesses and from established products. Operating profit results for the quarter were particularly good, with double-digit increases for both our U.S. Retail and Bakeries and Foodservice segments," he said.
Products making the strongest contributions to U.S. Retail net sales growth in the third quarter included new items such as Honey Nut Cheerios Medley Crunch cereal, Fiber One Protein bars, Yoplait Greek 100 yogurt and frozen Green Giant Seasoned Steamers vegetables.
Also, sales were boosted by established brands such as Cheerios and Lucky Charms cereals, Progresso ready-to-serve soups, Nature Valley grain snack bars, Totino's frozen snacks and pizzas, Betty Crocker SuperMoist cake and pouch cookie mixes, and Pillsbury Grands! refrigerated biscuits.
In the Bakeries and Foodservice segment, the Yoplait Parfait Pro yogurt line, Pillsbury hot breakfast items, and new Minibon cinnamon rolls made strong contributions to third-quarter sales. Yoplait yogurt varieties in Europe, along with Haagen Dazs super-premium ice cream and Wanchai Ferry frozen dim sum varieties in China helped drive International sales growth.
Third-quarter net sales for General Mills' U.S. Retail segment grew two percent to $2.66 billion due to net price realization and mix. Net sales for General Mills' consolidated international businesses grew 24 percent to $1.30 billion, including 20 points of sales growth from new businesses.
Pound volume contributed 33 points of net sales growth, including 31 points from new businesses with strength in Asia/Pacific, Latin America, and Canada.
In the fourth quarter, General Mills said it expects supply chain costs to be above year-ago levels. The company continues to estimate fiscal 2013 input cost inflation of 3 percent. Fourth-quarter spending to support in-store merchandising also is expected to be above year-ago levels.
Adjusted diluted earnings per share for the fourth quarter are expected to be below year-ago results that grew 15 percent. Including this fourth quarter outlook, General Mills increased its guidance for fiscal 2013 adjusted diluted EPS to a range of $2.66 to $2.68, excluding mark-to-market effects, a net tax benefit recorded in the first quarter, and restructuring and integration costs.
"We are continuing to see slow, but steady, improvement in the operating environment," Powell said. "Trends in our established businesses are improving, and integration of our new businesses is going smoothly. We're preparing to launch a promising slate of new products as our new fiscal year begins this summer, and our plans for fiscal 2014 call for high single-digit EPS growth, consistent with our long-term model."
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