MINNEAPOLIS — Operating results were strong in the first quarter at General Mills, Inc., though the company sustained a net income decline of 4% after marketing-to-market commodity position losses. Company executives were pleased by the results and raised the full-year earnings outlook.
For the first quarter ended Aug. 24, General Mills posted net earnings of $278.5 million, equal to 83c per share on the common stock, down from $288.9 million, or 85c per share, during the same quarter of the previous year.
Results included the impact of mark-to-market downward commodity valuation adjustments (non-cash) of $91 million in the first quarter of 2009, versus $1 million in last year’s first quarter.
Net sales for the quarter were $3,497.3 million, up 14% from $3,012 million during the same quarter of the previous year.
"We’re off to a great start in 2009, powered by strong consumer demand for our products in markets around the world," said Ken Powell, chairman and chief executive officer. "Our U.S. Retail sales grew 13%, International sales rose 15% and Bakeries and Foodservice sales were up 17% for the quarter. Operating profits showed strong growth despite the input cost pressure and our increased consumer marketing investment. This broad momentum has us well on track to deliver solid sales and earnings growth for the full year."
The U.S. Retail segment had an operating profit of $526.3 million, up 11% from $473.3 million during the same quarter of the previous year. Sales for the segment were $2,290.3 million, up from $2,031.7 million during the same quarter of the previous year.
Net sales for Big G cereals grew 10%, including gains by Multi-Grain Cheerios, Honey Nut Cheerios, original Cheerios and the Fiber One cereal line.
In a Sept. 17 conference call with financial analysts, Jeff Harmening, vice-president and president of the Big G cereals division, said health, convenience and demographics are working in the unit’s favor.
"We know that consumers eat more cereal as they reach their 50s, so cereal is very much on trend with our aging baby boomer population," Mr. Harmening said. "And these trends are being supported by strong brand building efforts and innovation by industry players. Big G is currently leading the growth in the category. Our share in measured channels is up almost half a point in the latest 12 months and our growth has accelerated with retail sales of Big G cereals up 8% for the first quarter in ACNielsen measured channels alone."
Mr. Harmening also said the effectiveness of Big G’s merchandising has improved with a better mix of brands, event tie-ins and an increased use of displays.
The Baking Products division saw sales soar 25% behind strong gains in Betty Crocker dessert mixes and Gold Medal flour.
The company’s Pillsbury USA division posted sales growth of 6%, driven by improvement in Grands biscuits and Totino’s frozen pizza and snacks, while General Mills’ Snacks division rose 14% behind growth in Nature Valley and Fiber One grain snack bars.
The International segment had an operating profit of $78.5 million, up 11% from $71 million during the same quarter of the previous year. Sales for the segment were $690.1 million, up from $599.4 million during the same quarter of the previous year.
The Bakeries and Foodservice segment had an operating profit of $26.7 million, down 22% from $34 million during the same quarter of the previous year. Sales for the segment were $516.9 million, up from $440.9 million.
"Sales and profit results for the first quarter exceeded our expectations," Mr. Powell said. "This strong start increases our confidence that 2009 will be another year of good growth for our company even through we continue to estimate our input cost inflation at 9%."
The company updated its 2009 guidance to a range of $3.81 to $3.85 per share, up from a range of $3.78 to $3.83 per share.