MINNEAPOLIS, March 20, 2019 /PRNewswire/ -- General Mills (NYSE: GIS) today reported results for the third quarter ended February 24, 2019. Financial results for the third quarter and first nine months of fiscal 2019 include contributions from Blue Buffalo Pet Products, Inc. ("Blue Buffalo"), which was acquired on April 24, 2018.
"We had a strong third quarter, with positive organic sales growth and significant operating margin expansion," said General Mills Chairman and Chief Executive Officer Jeff Harmening. "Our year-to-date performance and fourth-quarter plans give us confidence that we will meet or exceed all of our key fiscal 2019 targets. For the full year, we now expect adjusted diluted EPS and free cash flow conversion will exceed our initial targets, net sales will finish toward the lower end of our guidance range, and adjusted operating profit will finish toward the higher end of the range. Our improved execution and strengthened performance this year reinforce our view that a balanced approach to top and bottom-line growth, centered on our Consumer First strategy, will drive long-term value for our shareholders."
General Mills is pursuing its Consumer First strategy and executing against its three key global growth priorities to drive consistent topline growth: 1) competing effectively through strong innovation, effective consumer marketing, and excellent in-store execution; 2) accelerating growth on its four differential growth platforms including Häagen-Dazs ice cream, snack bars, Old El Paso Mexican food, and its portfolio of natural and organic food brands; and 3) reshaping its portfolio through growth-enhancing acquisitions and divestitures, including the acquisition of Blue Buffalo, the leading brand in the fast-growing wholesome natural pet food category in the U.S. By combining consistent topline growth, margin expansion, and disciplined cash conversion and cash returns, General Mills expects to generate top-tier total shareholder returns over the long term.
Third Quarter Results Summary
- Net sales increased 8 percent to $4.20 billion and were up 10 percent in constant currency, driven primarily by the addition of Blue Buffalo. Organic net sales increased 1 percent, with positive net price realization and mix partially offset by lower contributions from volume. Organic net sales growth in the Asia & Latin America, North America Retail, and Convenience Stores & Foodservice segments was partially offset by a decline in Europe & Australia.
- Gross margin increased 200 basis points to 34.4 percent of net sales. Adjusted gross margin, which excludes certain items affecting comparability, increased 170 basis points to 34.2 percent, driven by cost savings, benefits from net price realization and mix, and the addition of Blue Buffalo, partially offset by higher input costs.
- Operating profit totaled $651 million, up 14 percent from last year due primarily to higher net sales and gross margin, partially offset by higher restructuring, impairment, and other exit costs and a loss on the sale of our La Salteña fresh pasta and refrigerated dough business in Argentina. Adjusted operating profit of $730 millionincreased 25 percent in constant currency, primarily driven by higher net sales, including the addition of Blue Buffalo, and higher adjusted gross margin. Operating profit margin of 15.5 percent increased 80 basis points. Adjusted operating profit margin increased 230 basis points to 17.4 percent.
- Net earnings attributable to General Mills totaled $447 million compared to $941 million a year ago, primarily reflecting benefits from the Tax Cuts and Jobs Act (TCJA) in last year's third quarter.
- Diluted EPS totaled $0.74, down 54 percent from the prior year. Adjusted diluted EPS totaled $0.83 in the third quarter, up 6 percent from the prior year in constant currency, driven by higher adjusted operating profit, partially offset by higher net interest expense, effective tax rate, and average diluted shares outstanding in the quarter.
Nine Month Results Summary
- Net sales increased 7 percent to $12.70 billion and were up 9 percent in constant currency, driven by the addition of Blue Buffalo. Organic net sales essentially matched year-ago levels, with positive net price realization and mix offset by lower contributions from volume. Organic net sales growth in the Asia & Latin America and Convenience Stores & Foodservice segments was offset by a decline in North America Retail.
- Gross margin decreased 10 basis points to 33.8 percent of net sales. Adjusted gross margin increased 10 basis points to 34.1 percent, despite a 40 basis point headwind from a first-quarter purchase accounting adjustment related to the Blue Buffalo acquisition.
- Operating profit totaled $1.80 billion, down 4 percent from the prior year. Constant-currency adjusted operating profit increased 11 percent. Operating profit margin of 14.2 percent was down 170 basis points. Adjusted operating profit margin increased 60 basis points to 16.8 percent.
- Net earnings attributable to General Mills totaled $1.18 billion.
- Diluted EPS of $1.96 was 36 percent below prior-year levels. Adjusted diluted EPS of $2.39 was up 3 percent on a constant-currency basis.
