General Mills today reported results for the third quarter of fiscal 2016.
Third Quarter Results Summary
- Net sales declined 8 percent to $4.0 billion, including a 3 point decline from the Green Giant divestiture. On a constant-currency basis, net sales declined 4 percent.
- Total segment operating profit totaled $679 million, down 3 percent. In constant currency, total segment operating profit declined 1 percent.
- Diluted earnings per share (EPS) totaled 59 cents compared to 56 cents a year ago.
- Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled 65 cents in the third quarter of 2016 compared to 70 cents a year ago. On a constant-currency basis, adjusted diluted EPS declined 6 percent.
General Mills Chairman and Chief Executive Officer Ken Powell said, “Our third-quarter financial results were in line with our expectations. We reported a decline in net sales as anticipated, primarily reflecting the Green Giant divestiture and continued foreign exchange headwinds. Constant-currency segment operating profit was down modestly, as our cost savings efforts more than offset the impact of the Green Giant sale. Our disciplined financial management has enabled us to expand our adjusted operating profit margin for the fifth consecutive quarter while still investing in Consumer First renovation and innovation news.”
Net sales for the 13 weeks ended Feb. 28, 2016, declined 8 percent to $4.0 billion. Foreign currency exchange reduced net sales growth by 4 percentage points. Pound volume reduced net sales growth by 5 percent, and net price realization and mix contributed 1 point of net sales growth. The divestiture of the Green Giant business in November 2015 reduced net sales growth by 3 points and pound volume by 4 points. Adjusted gross margin, which excludes mark-to-market effects and certain other items affecting comparability, increased 160 basis points due to benefit from cost savings initiatives more than offsetting modest input cost inflation. Selling, general and administrative expenses (SG&A) declined 4 percent, driven by a 6 percent decrease in advertising and media expense and savings from our cost management. Total segment operating profit declined 3 percent to $679 million. On a constant-currency basis, total segment operating profit declined 1 percent. The company posted restructuring and project-related charges totaling $44 million pretax in the third quarter, including $27 million recorded in cost of sales. Net earnings attributable to General Mills totaled $362 million and diluted EPS totaled 59 cents. Adjusted diluted EPS, which excludes certain items affecting comparability, declined 7 percent to 65 cents.On a constant-currency basis, third-quarter adjusted diluted EPS declined 6 percent.
Nine Month Financial Summary
- Net sales through the first nine months of fiscal 2016 declined 5 percent to $12.64 billion, including a 1 point decline from acquisitions and divestitures.On a constant-currency basis, net sales declined 1 percent.
- Nine-month total segment operating profit totaled $2.34 billion, up 5 percent from the prior year. Constant-currency total segment operating profit grew 8 percent.
- Diluted EPS totaled $2.15 compared to $1.67 a year ago.
- Adjusted diluted EPS totaled $2.26 this year to date, up 7 percent versus year-ago levels. On a constant-currency basis, adjusted diluted EPS increased 10 percent.
Through the first nine months, General Mills constant-currency net sales declined 1 percent, reflecting the net impact of the Green Giant divestiture and the acquisition of the Annie’s business in October 2014. Total segment operating profit increased 8 percent and adjusted diluted EPS were up 10 percent in constant currency. Nine-month adjusted gross margin expanded by 170 basis points. U.S. Retail products making particularly strong contributions to nine-month net sales results include gluten-free Cheerios and Cinnamon Toast Crunch cereals, Yoplait Greek Whips! yogurt,Nature Valley grain snacks, Lärabar nutrition bars, Annie’s natural and organic products, and Totino’s hot snacks. In the Convenience Stores and Foodservice segment, Pillsbury frozen mini-bagels, Bugles and Chex Mix salty snacks, and YoplaitParfait Pro and Simply Go-GURT yogurt varieties were strong net sales contributors. International products posting strong nine-month net sales contributions include Häagen-Dazs ice cream and Old El Paso Mexican products in Europe,Nature Valley snacks in Canada, Fiber One snacks in Mexico, and Betty Crocker sweet snacks in the Asia/Pacific region.
U.S. Retail Segment Results
Third-quarter net sales for General Mills’ U.S. Retail segment totaled $2.48 billion, down 7 percent from the prior year. Net price realization and mix contributed 1 point of net sales growth, while lower pound volume reduced sales growth by 8 points. The Green Giant divestiture reduced U.S. Retail net sales growth by 5 points and pound volume by 6 points. U.S. Retail segment operating profit of $518 million essentially matched year-ago levels, with benefits from cost savings initiatives more than offsetting the divestiture impact.
Through nine months, U.S. Retail net sales declined 2 percent to $7.77 billion. Lower pound volume subtracted 4 points of net sales growth, while net price realization and mix added 2 points of growth. Acquisitions and divestitures reduced net sales by 1 point. Segment operating profit totaled $1.75 billion, 10 percent above last year.
Convenience Stores and Foodservice Segment Results
Third-quarter net sales for the Convenience Stores and Foodservice segment totaled $454 million, 2 percent below year-ago levels due to unfavorable net price realization. Cereal, yogurt, snacks, and frozen meals led sales performance in the quarter, while market index pricing on bakery flour was the primary contributor to the net sales decline. Segment operating profit increased 31 percent to $91 million, driven primarily by increased grain merchandising earnings, favorable product mix, and benefits from cost savings initiatives.
Through the first nine months of fiscal 2016, Convenience Stores and Foodservice net sales declined 2 percent to $1.44 billion. Pound volume and unfavorable net price realization each reduced net sales growth by 1 point. Nine-month segment operating profit totaled $273 million, 8 percent above year-ago results that grew 14 percent. Full report.
