General Mills (GIS, Financial) released its fiscal third-quarter 2021 results before the market opened on March 24. The maker of Cheerios and other cereal and shelf-stable products posted mixed results, with earnings falling below analysts' projections.
Performance at a glance
The Minneapolis-based company posted third quarter adjusted earnings per share of $0.82, which increased 6% as compared to the same quarter of last year. Revenue of $4.50 billion was up 8% on a year-over-year basis. Analysts had predicted EPS of $0.84 on $4.45 billion in revenue.
Organic sales rose 7% in the reported quarter. Weakness in the Convenience Stores and Foodservice segment was offset by solid growth in the North America Retail, Pet and Europe and Australia segments
Chairman and CEO Jeff Harmening commented the following:
"We continued to execute well and delivered profitable growth in the third quarter. We've made good progress on our fiscal 2021 priorities, including competing effectively, fueling investment in our brands and capabilities, and reducing our leverage. With our balance sheet in a strong position, we have resumed share repurchase activity in the fourth quarter. We're continuing to advance our Accelerate strategy, including yesterday's announcement of our proposed divestiture of our European Yoplait business. Looking ahead, we remain focused on strengthening our momentum and emerging from the pandemic a stronger company, even better positioned to drive long-term shareholder value."
In the North America Retail segment, net sales surged 9% to $2.73 billion, largely due to robust demand for at-home food during the pandemic. Sales increased 15% for U.S. Meals and Baking, 9% for U.S. cereal, 13% for Canada and 3% for U.S. Yogurt. By contrast, net sales for U.S. snacks slipped 3%. Segment operating profit totalled $606 million, reflecting a growth of 14% year-over-year.
The pet segment recorded $436 million in revenue, up 14% year-over-year. General Mills cited robust volume growth, which was partially negated by unfavourable net price realization and mix. Operating profit in the division rose 9% to $102 million.
Sales in the Convenience Stores and Foodservice business plunged 10% to $417 million, driven primarily by reduction in the away-from-home food demand. The operating profit was $64 million, down 31% from the prior-year quarter. Lower net sales coupled with fixed cost deleverage in the supply chain negatively impacted the metric.
Net sales in the Europe and Australia segment climbed 15% to $484 million owing to strong demand for at-home food and favorable foreign currency exchange rates. Organic sales soared 7%. Operating profit of $29 million rose 33% owing to sales growth in away-from-home channels coupled with net sales growth in Old EI Paso Mexican food and Betty Crocker dessert mix. Mounting input costs partly negated the growth.
In Asia and Latin America, net sales of $456 million were up 12% due to higher away-from-home food demand, which was partially offset by adverse foreign currency exchange rates. Volume growth and favorable net price realization and mix also helped. Organic net sales climbed 14% as compared with the year-ago results. The company reported an operating profit of $12 million in the segment.
For full-year fiscal 2021, General Mills said it expects sales to grow around 3%. Moreover, the company said that demand for packaged food is expected to continue to be higher than the pre-Covid level.
Disclosure: I do not hold any positions in the stocks mentioned.
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