- Net sales increased 2 percent to $4.2 billion; organic net sales¹ increased 1 percent
- Operating profit declined 5 percent; total segment operating profit was down 8 percent in constant currency
- Diluted earnings per share (EPS) declined 8 percent to $0.74; adjusted diluted EPS totaled $0.82, down 5 percent in constant currency
- First-half operating cash flow increased 45 percent to $1.6 billion; free cash flow increased 72 percent to $1.3 billion
- Company revises fiscal 2018 full-year organic net sales outlook based on better than expected year-to-date results. Organic net sales are now expected to range between flat and down 1 percent, compared to the previous range of a decline of 1 to 2 percent
MINNEAPOLIS, Dec. 20, 2017 /PRNewswire/ -- General Mills reported results for the second quarter ended November 26, 2017.
"I'm pleased with the breadth of the topline improvement we delivered this quarter across our geographies, product platforms, and channels," said General Mills Chief Executive Officer Jeff Harmening. "We're executing better, with stronger innovation, more effective brand building, and better merchandising leading to market share gains in the majority of our key global platforms. I'm also pleased that we delivered topline growth in absolute terms."
Harmening continued, "At the same time, we still have important work to do to achieve our full-year goals. Our profit was down in the first half, but I'm confident we will deliver profit growth in the second half. With two quarters behind us and good visibility to the impact of our strong second-half plans, we're raising our 2018 organic sales guidance and maintaining our outlook for profit and EPS. I'm encouraged by the step that fiscal 2018 represents in our effort to return our business to consistent top- and bottom-line growth for the long term."
General Mills' approach to long-term shareholder value creation focuses on generating a balance of topline growth and margin expansion, combined with disciplined focus on cash conversion and cash returns. The company is pursuing its Consumer First strategy by increasing investment in innovation and brand building to drive improved net sales performance. For fiscal 2018, the company has identified four global growth priorities: 1) growing cereal globally, including Cereal Partners Worldwide (CPW); 2) improving U.S. yogurt through innovation; 3) investing in differential growth opportunities including Häagen-Dazs ice cream, snack bars, Old El Paso Mexican food, and its portfolio of natural and organic food brands; and 4) managing Foundation brands with appropriate investment. By directing resources toward these global priorities, General Mills expects to drive a significant improvement in its organic net sales trends in fiscal 2018, which represents an important step in returning the business to consistent organic net sales growth.
Second Quarter Results Summary
- Reported net sales increased 2 percent to $4.20 billion. Organic net sales increased 1 percent, with growth across all four operating segments.
- Gross margin decreased 260 basis points to 34.4 percent of net sales. Adjusted gross margin, which excludes certain items affecting comparability, decreased 240 basis points to 34.4 percent, driven by higher input costs including currency-driven inflation on imported products, as well as unfavorable trade expense phasing.
- Operating profit totaled $730 million, down 5 percent from last year due to lower gross margins partially offset by higher net sales. Operating profit margin of 17.4 percent declined 130 basis points. Adjusted operating profit margin decreased 220 basis points to 17.4 percent, primarily reflecting lower adjusted gross margin and a 7 percent increase in advertising and media expense, partially offset by benefits from cost savings initiatives.
- Total segment operating profit of $773 million was down 8 percent in constant currency.
- The effective tax rate in the quarter was 35.9 percent compared to 32.8 percent last year, driven by a $42 millionprior-year adjustment (please see Note 7 below for more information on our effective tax rate). Excluding items affecting comparability, the adjusted effective tax rate was 29.3 percent compared to 32.4 percent a year ago.
- Net earnings attributable to General Mills totaled $430 million, down 11 percent from a year ago. Diluted EPS of $0.74 declined 8 percent, with lower net earnings offset by 3 percent fewer average diluted shares outstanding.
- Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $0.82 in the second quarter, down 4 percent from the prior year. Constant-currency adjusted diluted EPS declined 5 percent, reflecting lower adjusted operating profit, partially offset by lower taxes and average diluted shares outstanding in the quarter.
Six Month Results Summary
- Reported net sales declined 1 percent to $7.97 billion. Organic net sales were also down 1 percent, primarily reflecting volume declines in the North America Retail and Asia & Latin America segments.
- Gross margin decreased 210 basis points to 34.5 percent of net sales. Adjusted gross margin was down 240 basis points to 34.7 percent.
- Operating profit totaled $1.36 billion, down 4 percent from the prior year. Operating profit margin of 17.0 percent was down 60 basis points. Adjusted operating profit margin decreased 220 basis points to 17.2 percent.
- Total segment operating profit of $1.44 billion was down 12 percent in constant currency.
- Net earnings attributable to General Mills totaled $835 million. Diluted EPS of $1.43 declined 3 percent from the prior year.
- Adjusted diluted EPS of $1.53 was down 6 percent as reported and down 7 percent on a constant-currency basis.
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