General Mills Inc. reported results for the fourth quarter and full fiscal year ended May 29, 2011.
Chairman and Chief Executive Officer Ken Powell said in a prepared statement, "This past year represented a challenging operating environment for food manufacturers, as we experienced the return and rapid acceleration of cost inflation for various food ingredients and energy. We're generally pleased with our 2011 sales and profit results, which met the key targets we set for the year and represent performance consistent with our long-term growth model."
General Mills net sales in fiscal 2011 increased 2 percent to $14.9 billion. Increased pound volume contributed 1 point of net sales growth, and price and mix contributed 1 point of growth. Foreign currency translation had no meaningful impact on the net sales growth rate. Gross margin expanded to 40.0 percent, reflecting increased mark-to-market valuation for certain commodity positions as well as effective holistic margin management (HMM) cost-saving initiatives. Excluding mark-to-market effects, gross margin was 39.4 percent. Following a 24 percent increase in media investment during fiscal 2010, media expense declined 7 percent in 2011. Segment operating profit rose 4 percent to exceed $2.9 billion, led by the company's International and Bakeries and Foodservice segments. Net earnings grew 18 percent to $1.8 billion, including a net increase in mark-to-market valuation of certain commodity positions along with a net benefit from certain tax items. Diluted earnings per share grew 20 percent to $2.70. Earnings per share excluding the mark-to-market effects and tax items would total $2.48. (Please see Note 9 to the consolidated financial statements below for a reconciliation of this non-GAAP number).
Net sales for the fourth quarter of 2011 totaled $3.6 billion. Pound volume declined 4 percent from strong year-ago levels, reflecting reduced depth and frequency of trade promotion in the period. Price realization and mix contributed 6 points of net sales growth. Foreign currency translation added 1 point of sales growth for the quarter. Gross margin of 37.5 percent was above year-ago levels due to mark-to-market effects, HMM cost savings and price realization. Media expense was 9 percent below year-ago levels that increased 10 percent. Segment operating profit grew 14 percent, reflecting double-digit increases for the bakeries and foodservice and International segments. Net earnings reached $320 million, up 51 percent from year-ago results that included a $35 million tax charge (5 cents per share) related to federal health care reform and $40 million pre-tax expense (4 cents per share) associated with a debt refinancing. Diluted earnings per share grew 55 percent to $0.48 per share. Earnings per share excluding mark-to-market effects and certain tax items in both years would total $0.52 in the fourth quarter of 2011 compared to $0.41 a year ago.
Fiscal 2011 net sales and pound volume for General Mills' U.S. retail operations generally matched strong year ago levels. Total U.S. Retail segment net sales were $10.2 billion. Net sales for the Big G cereal division were 2 percent below year-ago sales that grew 5 percent. Meals division net sales declined 1 percent, as growth for Old El Paso Mexican products, Progresso soup, and Wanchai Ferry and Macaroni Grill frozen entrees was offset by softness in Helper dinner mixes and Green Giant canned vegetables. Pillsbury division net sales declined 2 percent, reflecting lower sales for Totino's frozen pizza.
Baking products division net sales were 4 percent below year-ago results. Snacks division net sales grew 5 percent in fiscal 2011, led by Nature Valley and Fiber One grain snack bars. Yoplait division net sales grew 1 percent. And net sales for the Small Planet Foods organic and natural foods division rose 13 percent, led by double-digit growth by Larabar fruit and nut bars. U.S. Retail segment operating profit of $2.3 billion was 2 percent below year-ago levels, reflecting higher input costs. Media expense, which rose 22 percent in 2010, was down 9 percent in 2011.