During fiscal 1Q16, General Mills (GIS) paid $34 million in cash related to restructuring projects. In addition to the restructuring charges, the company expects to incur ~$71 million in additional restructuring initiative project-related costs. This will be recorded in the cost of sales. All of it will be cash. The company also noted $13 million for project-related expenses in fiscal 1Q16.
In fiscal 1Q16, the company approved “Project Compass.” It’s a restructuring plan. Project Compass is designed to enable the international segment to accelerate its long-term growth. The company can achieve this by increasing its organizational effectiveness and decreasing administrative expenses.
In regards to this project, the company expects to eliminate ~675–725 positions. It also expects to incur ~$59 million in net expenses. These charges will also include ~$56 million in cash. The company recorded $52 million in restructuring charges in fiscal 1Q16. It expects this new project to be completed by early fiscal 2017.
“Project Century” is an initiative of General Mills’ North American manufacturing and distribution network. The project is intended to streamline its operations and recognize potential capacity reductions. In fiscal 1Q16, the company noted $25 million in restructuring charges related to Project Century actions already in progress. As part of Project Century, the company recently informed the employees at its snacks manufacturing facility in Joplin, Missouri, of its decision to close the plant in the US retail supply chain.
This project will impact ~120 positions. The company expects to incur ~$12 million in net expenses. This includes ~$5 million in cash. In fiscal 1Q16, the company recorded $5 million in restructuring charges related to Project Century. General Mills expects the project to be complete by the end of fiscal 2018.
During fiscal 2Q15, the company approved “Project Catalyst.” It’s a restructuring plan to improve organizational effectiveness and lessen overhead expenses. The company expects to eliminate ~800 positions related to this project—mainly in the US. It also expects to incur ~$148 million in net expenses. This will include ~$118 million in cash. General Mills completed this project in fiscal 2015. The savings from the project drove the SG&A (selling, general and administrative) expenses for fiscal 1Q16.
Other cost reduction initiatives
During fiscal 1Q15, the company agreed to a plan to combine certain Yoplait and operational facilities within the international segment to improve efficiencies and minimize costs. This combination plan will impact ~240 positions. The company expects to incur ~$15 million in net expenses. This includes ~$14 million in cash.
The company recorded $14 million in restructuring charges for the project in fiscal 1Q15. The company anticipates this combination of operational facilities to be completed in fiscal 2016.
Together, these initiatives are expected to deliver annual savings of around $285–$310 million in fiscal 2016 and more than $400 million in fiscal 2017.
General Mills’ peers include Bunge (BG), J.M. Smucker (SJM), and Flowers Foods (FLO). All of the companies belong to the packaged food industry. The peers reported net margins of 2.2%, 8.4%, 5%, respectively, for their recently reported quarters. The Power Shares S&P 500 Low Volatility (SPLV) invests 1.1% of its portfolio in J.M. Smucker.