General Mills 1Q16 Performance: Further Breakdowns



1Q16 highlights

General Mills’ (GIS) net sales for its latest 13-week quarter ending August 30, 2015, declined by 1% to $4.21 billion. The reason for this decline was due to foreign currency exchange net sales, which grew by 5 percentage points. On a constant-currency basis, net sales grew by 4%, including two points of growth. The company’s acquisition of Annie’s Homegrown in October 2014 contributed to this growth.

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General Mills’ pound volume was 2% above year-ago levels as well. The company’s net price realization and mix contributed 2 percentage points of net sales growth. Its adjusted gross margin increased by 290 basis points due to improved net price realization and savings from the company’s cost-reduction initiatives. This figure excludes mark-to-market effects and certain other items affecting comparability.

The company’s SG&A (selling, general, and administrative) expenses declined by 6%. Savings from Project Catalyst and a 5% decrease in advertising and media expense drove this decline in the company’s SG&A expenses.

Operating profit and EPS

General Mills’ total segment operating profits rose by 20% to $826 million. On a constant-currency basis, its total segment operating profit increased by 23%. The company posted restructuring and project-related charges totaling $95 million, pretax, in 1Q16, including $35 million recorded in the cost of sales. Net earnings attributable to General Mills totaled $427 million. Diluted EPS (earnings per share) totaled $0.69.

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The company’s adjusted diluted EPS, which excludes certain items that affect comparability, totaled $0.79, compared to $0.61 a year ago. On a constant-currency basis, its 1Q16 adjusted diluted EPS increased by 36%. Its combined, after-tax earnings from the Cereal Partners Worldwide (CPW) and Haagen-Dazs Japan (HDJ) joint ventures totaled $26 million.

These results essentially matched year-ago results. The company’s constant-currency, after-tax earnings from joint ventures grew by 16%. The constant-currency net sales rose by 9% for HDJ and were down by 2% for CPW.

Peer performances

General Mills’ peer Bunge (BG) reported a year-to-date return of -22.45%. However, GIS, J.M.Smucker (SJM), and Flowers Foods (FLO) reported positive year-to-date returns of 6.79%, 12.33%, and 32.36%, respectively. The Power Shares S&P 500 Low Volatility (SPLV) invests 1.15% of its portfolio in GIS.



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