MINNEAPOLIS, June 29, 2016 /PRNewswire/ -- General Mills reported results for the fourth quarter and full fiscal year ended May 29, 2016. These results reflect the impact of foreign exchange headwinds, the sale of the North American Green Giant business, and one less week compared to fiscal 2015.
Fiscal 2016 Financial Summary
- Net sales declined 6 percent to $16.6 billion. On a constant-currency basis, net sales decreased 2 percent.
- Operating profit totaled $2.7 billion, up 30 percent compared to the prior year. Operating profit margin increased 450 basis points to 16.3 percent of net sales. Adjusted operating profit margin increased 90 basis points to 16.8 percent of net sales.
- Total segment operating profit declined 1 percent to $3.0 billion. In constant currency, total segment operating profit increased 1 percent.
- Diluted earnings per share (EPS) were $2.77, up 41 percent from $1.97 a year ago.
- Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $2.92 in fiscal 2016, up 2 percent from $2.86 a year ago. On a constant-currency basis, adjusted diluted EPS increased 5 percent.
- Net cash returned to shareholders in fiscal 2016 totaled $1.5 billion, including a 7 percent increase in dividends paid per share and share repurchases that reduced average diluted shares outstanding by 1 percent.
"We made important progress strengthening our business model and bringing our Consumer First strategy to life in our brands in fiscal 2016," said General Mills Chairman and Chief Executive Officer Ken Powell. "Most importantly, we returned the business to organic sales and operating profit growth, while continuing to drive improvement in free cash flow. Our renovation and innovation efforts helped improve topline momentum on many businesses, and our productivity and cost-savings initiatives drove strong margin expansion, delivering profit and EPS ahead of our expectations. We also took important strategic actions to reshape our portfolio for growth, including the divestiture of the Green Giant vegetable business in North America, the expansion of our recently acquired Annie's brand into new categories, the launch of Yoplait yogurt in China, and the acquisitions of EPIC Provisions meat snacks in the U.S. and Carolina yogurt in Brazil.
"We're now going to build on our 2016 successes by investing to grow where we have positive net sales momentum, taking clear Consumer First actions to establish a solid base for long-term growth on certain other businesses, accelerating our margin expansion efforts already in progress, and taking additional actions to optimize spending, reduce complexity, and prioritize profitable volume."
Update on Cost Savings and Adjusted Operating Profit Margin Targets
With strong savings in fiscal 2016, and visibility to further savings over the next two years, General Mills now expects its previously announced cost-reduction and organizational efficiency initiatives – including Projects Century, Catalyst, and Compass, as well as administrative cost reductions delivered through zero-based budgeting – to generate total annual savings of $600 million by fiscal 2018, up from the previous target of $500 million (please see Note 4 below for more information on our restructuring actions).
The company also announced it is undertaking further efforts to prioritize investments, reduce complexity, and streamline its operations to drive profitable sales growth. As a result, General Mills is increasing and accelerating its previous margin expansion target. The company now expects to achieve an adjusted operating profit margin of 20 percent by fiscal 2018, an increase of 400 basis points over fiscal 2015 levels.
Key drivers of margin expansion over the next two years will include:
- Strong levels of Holistic Margin Management productivity gains;
- Continuing savings from previously announced cost-reduction initiatives;
- Increased efficiency and prioritization of commercial investments, including trade and consumer spending;
- Continuing focus on complexity reduction through SKU optimization;
- Further supply chain optimization; and,
- Continued expansion of zero-based budgeting across the business.
Full Year Results
Fiscal 2016 net sales decreased 6 percent to $16.6 billion. Pound volume reduced net sales growth by 3 percentage points, and net price realization and mix contributed 1 point of net sales growth. Foreign currency exchange effects reduced net sales growth by 4 points. On a constant-currency basis, net sales decreased 2 percent. The impact of one less week compared to fiscal 2015 and the net impact of acquisitions and divestitures subtracted 2 points of growth. Gross margin increased 150 basis points, reflecting the benefit of cost savings initiatives more than offsetting 2 percent input cost inflation. Adjusted gross margin, which excludes mark-to-market effects and certain other items affecting comparability, increased 90 basis points. Selling, general, and administrative expenses decreased 6 percent due to an 8 percent decrease in advertising and media expense and savings from our cost-reduction initiatives. Total segment operating profit declined 1 percent to $3.0 billion. On a constant-currency basis, total segment operating profit increased 1 percent. Adjusted operating profit margin increased 90 basis points to 16.8 percent of net sales. Restructuring and project-related charges totaled $287 million, including $136 millionrecorded in cost of sales (please see Note 4 below for more information on these charges). The company recorded a gain of $148 million from divestitures, reflecting the divestiture of the Green Giant business in November 2015. Fiscal 2016 net earnings attributable to General Mills totaled $1.7 billion and diluted EPS totaled $2.77. Adjusted diluted EPS totaled $2.92 in fiscal 2016, up 2 percent from $2.86 earned last year. On a constant-currency basis, adjusted diluted EPS increased 5 percent.
Fourth Quarter Results
Fourth-quarter net sales declined 9 percent to $3.9 billion. Pound volume reduced net sales growth by 7 percentage points, and net price realization and mix reduced net sales growth by 1 point. Foreign currency exchange effects reduced net sales growth by 1 point. On a constant-currency basis, net sales decreased 8 percent. The impact of one less week and the net impact of acquisitions and divestitures subtracted 9 points of growth. Gross margin declined 20 basis points, reflecting higher input cost inflation in the quarter. Adjusted gross margin declined 130 basis points. Operating profit increased 26 percent to $532 million. Total segment operating profit decreased 18 percent to $654 million. Net earnings attributable to General Mills totaled $380 million and diluted EPS totaled 62 cents compared to 30 cents a year ago. Adjusted diluted EPS totaled 66 cents for the fourth quarter, down 12 percent from 75 cents a year ago. On a constant-currency basis, fourth-quarter adjusted diluted EPS declined 11 percent.
U.S. Retail Segment Results
Fiscal 2016 net sales for General Mills' U.S. Retail segment declined 5 percent to $10.0 billion. Pound volume reduced net sales growth by 7 percentage points, and net price realization and mix contributed 2 points of net sales growth. The impact of one less week and the net impact of acquisitions and divestitures subtracted 3 points of growth. U.S. Retail segment operating profit increased 1 percent to $2.2 billion.
Fourth-quarter net sales for the U.S. Retail segment declined 12 percent to $2.2 billion. Pound volume reduced net sales growth by 15 percentage points, and net price realization and mix contributed 3 points of net sales growth. The impact of one less week and the net impact of acquisitions and divestitures subtracted 10 points of growth. Segment operating profit totaled $430 million, 24 percent below year-ago results.
Convenience Stores and Foodservice Segment Results
Fiscal 2016 net sales for the Convenience Stores and Foodservice segment totaled $1.9 billion, 4 percent below prior-year results. Pound volume reduced net sales growth by 3 percentage points, and net price realization and mix reduced net sales growth by 1 point, reflecting index pricing on bakery flour. The impact of one less week subtracted 2 points of growth. Segment operating profit totaled $379 million, an increase of 7 percent.
In the fourth quarter, Convenience Stores and Foodservice net sales declined 8 percent to $487 million, reflecting lower pound volume. The impact of one less week subtracted 6 points of growth. Segment operating profit rose 5 percent to $106 million. Full report.
