General Mills (GIS, Financial) released its fiscal fourth-quarter 2021 results before the market opened on June 30. The maker of Cheerios and other cereal and shelf-stable products posted strong results, with earnings and revenue surpassing analysts' projections. Throughout the fourth quarter, the company fuelled investment in its brands and capabilities, competed effectively and reduced leverage, thereby leading to a strong quarter.
Quarter snapshot
The Minneapolis-based company posted fourth-quarter adjusted earnings per share of $0.91, which increased 6% as compared to the same quarter of last year. Revenue of $4.5 billion was down 10% on a year-over-year basis. Analysts had predicted adjusted EPS of $0.83 on $4.33 billion in revenue.
Organic sales plunged 6% in the reported quarter. Solid growth in the Convenience Stores and Foodservice segments was offset by weakness in the North America Retail and Pet segments.
For full-year fiscal 2021, revenue amounted to $18.1 billion compared to $17.6 billion in fiscal 2020. GAAP earnings were $2.34 billion, translating to $3.78 per diluted share. That compares with earnings of $2.21 billion, or $3.56 per share, recorded in 2020.
Chairman and CEO Jeff Harmening commented the following:
“I’m pleased with the results the General Mills team delivered in fiscal 2021 under difficult circumstances. We competed effectively, generated strong top- and bottom-line growth, and further improved our balance sheet, allowing us to resume dividend growth and share repurchases. In addition, we advanced our Accelerate strategy by investing in our brands, strengthening our capabilities, building on our leading position as a force for good, and taking significant steps to reshape our portfolio and our organization for future growth.”
Segment performance
In the North America Retail segment, net sales dropped 17% to $2.92 billion, largely due to a tough comparison to the prior-year quarter, when robust demand for stocking up on dry goods during the pandemic was in full swing. Sales decreased 30% for U.S. Meals and Baking, 16% for U.S. cereal, 9% for Canada and 6% for U.S. Yogurt. Likewise, net sales for U.S. snacks slipped 2%. Segment operating profit totalled $620 million, reflecting a decline of 30% year-over-year.
The pet segment recorded $444 million in revenue, down 20% year-over-year. General Mills cited robust demand in the prior-year quarter, driven by the pandemic, which was partially negated by favourable net price realization and mix. Operating profit in the division rose 9% to $102 million on account of low volume and mounting input costs.
Sales in the Convenience Stores and Foodservice business improved 25% to $493 million, driven primarily by reduction in the away-from-home food demand a year ago. The operating profit was $94 million, up 143% from the prior-year quarter. Higher net sales coupled with lower SG&A expenses positively impacted the metric. This was only partially negated by fixed cost deleverage in the supply chain.
Net sales in the Europe and Australia segment jumped 2% to $539 million owing to strong demand for at-home food and favorable foreign currency exchange rates. By contrast, organic sales dropped 2%. Operating profit of $33 million remained unchanged from the prior-year quarter, but down 16% in constant currency. This reflected higher input costs and lower net sales.
In Asia and Latin America, net sales of $407 million were up 17% due to higher away-from-home food demand coupled with positive foreign currency exchange rates. Volume growth and favorable net price realization and mix also helped. Organic net sales climbed 22% as compared with the year-ago results. The company reported an operating profit of $23 million in the segment.
Looking forward
For full-year fiscal 2022, General Mills said it expects organic sales to decline around 1% to 3%. However, the company said that demand for packaged food is expected to continue to be higher than the pre-Covid level.
