General Mills Inc. (GIS, Financial) reported second-quarter financial results on Dec. 19. The company’s cost-saving initiatives during the quarter paid off in the form of higher margins.
Looking ahead, CEO Jeff Harmening said, "Our job to do in the second half is to accelerate our sales growth while maintaining that same (cost and capital) discipline."
By the numbers
The Cheerios cereal maker recorded quarterly earnings of 85 cents per share, up 3.6% on a year-over-year basis and 2% on a constant-currency basis. Sales spiked 5% to $4.41 billion.
The company’s gross margin increased to 34.5% due to cost-saving initiatives as well as gains from mix and price realizations. However, gross margin growth was offset by mounting input costs.
General Mills' adjusted operating profit grew 7.6% from the prior-year period to $765.2 million, owing to heavy sales and an improved gross margin. The adjusted operating margin surged 40 basis points to 17.3%. Selling, general and administrative expenses plunged 30 basis points to 17.2%.
Segment details
In the North America sector, the company generated $2.67 billion in revenue, which decreased 3.4% from the year-ago quarter as a result or lower sales in the U.S., especially in the cereal and snacks businesses. Organic sales in the segment were down 3%.
As far as Europe and Australia are concerned, the combined revenue dropped 2.8% to $453.8 million due to unfavorable currency fluctuations. Further, organic sales remained flat from last year.Ă‚
Pet segment sales came in at $335.2 million, a 7% decline on a pro-forma basis due to tough year-on-year comparison.
The Convenience Store and Food Service business saw revenue grow 0.4% to $514.4 million thanks to an increase in demand for the Focus 6 platforms, which comprises frozen meals and snacks. Organic sales remained flat compared to a year ago.
In Asia and Latin America, sales fell roughly 4% to $430.7 million on account of unfavorable currency movements. On the other hand, organic sales incresaed 5%, driven by robust performance of Pillsbury, Nature Valley snack bars, Häagen-Dazs ice cream, Wanchai Ferry frozen dumplings and other products.
Guidance
The company projects organic sales growth of flat to 1%. Furthermore, it anticipates adjusted operating profit growth of 6% to 9%. The company sees net sales growth of 9-10% on a constant-currency basis, which includes the impact of Blue Buffalo’s buyout. The company looks forward to depolying its Consumer First Strategy, cost reduction schemes and will also focus on achieving global growth.
Disclosure: I do not hold any positions in the stocks mentioned.
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