uploads///International Segments Performance

General Mills’ Restructuring Plans for Its International Segment

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Oct. 1 2015, Updated 1:07 p.m. ET

Project Compass

In the first quarter of fiscal 2016, General Mills (GIS) approved Project Compass, a restructuring plan designed to enable their International segment to accelerate long-term growth. The company can achieve this by increasing organizational effectiveness and reducing administrative expenses.

In conjunction with this project, the company expects to eliminate ~675–725 positions. It also expects to incur ~$59 million of net expenses. These charges will also include ~$56 million in cash. The company recorded $52 million in restructuring charges in 1Q16. It expects this new project to be completed by early fiscal 2017.

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Project Century

Project Century is a review of General Mills’ North American manufacturing and distribution network. This project’s motive is to streamline operations and identify potential capacity reductions.

In 1Q16, General Mills recorded $25 million in restructuring charges related to Project Century actions already in progress. As part of Project Century, the company recently notified the employees at its snacks manufacturing facility in Joplin, Missouri, of their decision to close this plant in the US Retail supply chain.

This project will affect ~120 positions. The company expects to incur ~$12 million in net expenses, which includes ~$5 million in cash. In 1Q16, the company recorded $5 million in restructuring charges related to Project Century. General Mills expects this project to be completed by the end of fiscal 2018.

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Project Catalyst

During 2Q15, General Mills approved Project Catalyst, a restructuring plan to increase organizational effectiveness and reduce overhead expense. In conjunction with this project, the company expects to eliminate ~800 positions, primarily in the US. It also expects to incur ~$148 million in net expenses, which will include ~$118 million in cash. General Mills completed this project in fiscal 2015.

During 1Q15, General Mills also approved a plan to combine certain Yoplait and General Mills operational facilities within the International segment in order to increase efficiencies and reduce costs. This combination plan will affect ~240 positions, and the company expects to incur ~$15 million of net expenses, which includes ~$14 million in cash.

General Mills recorded $14 million in restructuring charges for the project in 1Q15. The company expects this combination of operational facilities to be completed in fiscal 2016.

Restructuring initiatives

During the three-month period ending August 30, 2015, General Mills paid $34 million in cash related to restructuring initiatives. In addition to restructuring charges, the company expects to incur ~$71 million in additional restructuring initiative project-related costs, which will be recorded under cost of sales, all of which will be cash. The company also recorded $13 million in 1Q16 for project-related expenses.

General Mills’ peers include Bunge (BG), J.M.Smucker (SJM), and Flowers Foods (FLO), all of which belong to the packaged food industry. These competitors reported net margins of 0.80%, 6.99%, 5.82%, respectively, for their corresponding quarters.

The Power Shares S&P 500 Low Volatility (SPLV) invests 1.12% of its portfolio in SJM.

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