Fri. Nov 15th, 2019

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GIS: General Mills (NYSE: GIS)

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General Mills (NYSE: GIS) newly stated results for the 1st-quarter finished August 25, 2k19.

  • Operating profit raised 10.00 percent; constant-currency adjusted operating profit¹ raised 7.0 percent
  • Diluted earnings for each share (EPS) totalled $0.850, up 31.00 percent from the previous year; adjusted diluted EPS of $0.790 raised 13.00 percent in constant currency
  • Net sales reduced 2.0 percent to $4.00B; organic net sales were down 1.0 percent
  • Company reaffirmed its full-year fiscal 2k20 outlook

1st-Quarter Results Summary

  • Net sales declined 2.0 percent to $4.00B. Organic net sales were down 1.0 percent, reflecting lower organic volume, partially offset by positive organic net price realization and mix across all operating segments.
  • Gross margin raised 190 basis points to 34.70 percent of net sales. Adjusted gross margin of 35.20 percent was 160 basis points above the previous year result that included a one-time purchase accounting inventory adjustment related to the Blue Buffalo acquisition.
  • Operating profit totalled $662.00M, up 10.00 percent from previous year. Operating profit margin of 16.50 percent raised 180 basis points. Constant-currency adjusted operating profit raised 7.0 percent, driven by the purchase accounting impact in the previous year. Adjusted operating profit margin raised 130 basis points to 17.00 percent.
  • Net earnings attributable to General Mills totalled $521.00M, up 33.00 percent from a year ago, mainly reflecting higher operating profit, a lower effective tax rate, and lower net interest cost.
  • Diluted EPS of $0.850 raised 31.00 percent from the previous year. Adjusted diluted EPS totalled $0.790 in the 1st-quarter, up 13.00 percent from the previous year in constant currency, driven mainly by higher adjusted operating profit, lower net interest cost, a lower adjusted effective tax rate, and higher non-service benefit plan income, partially offset by higher average diluted shares outstanding.

North America Retail Segment
First-quarter net sales for General Mills’ North America Retail segment totalled $2.380B, essentially matching year-ago levels, with benefits from net price realization and mix offset by lower contributions from volume. The segment maintained momentum in the U.S. Cereal operating unit, where net sales were up 1.0 percent, while improving trends in U.S. Yogurt and U.S. Snacks, where net sales were flat and down 1.0 percent, respectively. Net sales in the U.S. Meals & Baking unit declined 1.0 percent, and constant-currency net sales in Canada were also down 1.0 percent. First-quarter retail sales were flat in U.S. Nielsen-measured outlets. Segment operating profit of $560.00M raised 2.0 percent, driven by HMM cost savings and benefits from positive net price realization and mix, partially offset by input cost inflation and higher brand-building investments.

Pet Segment
First-quarter net sales for the Pet segment raised 7.0 percent to $368.00M, driven by positive contributions from volume growth and positive net price realization and mix, partially offset by the comparison to an extra week of results in last year’s 1st-quarter related to acquisition timing. Apart From the timing difference, net sales raised in the mid teens. Pet parent takeaway accelerated in the quarter, with all-channel retail sales up low double digits. Segment operating profit totalled $81.00M contrast to $14.00M in the previous year, driven mainly by a $53.00M one-time purchase accounting inventory adjustment in the year-ago duration in addition to higher net sales.

Convenience Stores & Foodservice Segment
First-quarter net sales for the Convenience Stores & Foodservice segment declined 4.0 percent to $445.00M, driven by lower bakery flour volume and unfavourable index pricing, partially offset by low single-digit growth for the Focus 6 platforms counting strong performance on cereal and frozen baked goods. Segment operating profit of $91.00M was 6.0 percent below the year-ago result that grew 14.00 percent.

Europe & Australia Segment
First-quarter net sales for the Europe & Australia segment declined 9.0 percent to $454.00M, driven by lower volume and unfavourable foreign currency exchange, partially offset by benefits from net price realization and mix. Organic net sales were down 5.0 percent, driven mostly by a continued challenging retail environment in France for yogurt and ice cream, in addition to differences in merchandising phasing. Segment operating profit totalled $28.00M contrast to $34.00M a year ago. On a constant-currency basis, segment operating profit was down 15.00 percent, driven mainly by a timing difference in brand-building investment and lower volume, partially offset by benefits from net price realization and mix.

Asia & Latin America Segment
First-quarter net sales for the Asia & Latin America segment declined 10.00 percent to $360.00M, driven by a 5-point headwind from divestitures executed in fiscal 2k19, lower volume, and unfavourable foreign currency exchange, partially offset by benefits from net price realization and mix. Organic net sales were down 3.0 percent, driven by retailer inventory reductions in Brazil, distribution network changes in India, and lower volumes in China. First-quarter net sales results also contrast against the strongest quarter of growth last year, when organic net sales were up 8.0 percent. Segment operating profit totalled $10.00M contrast to $12.00M a year ago.

Joint Venture Summary
Combined after-tax earnings from joint ventures totalled $22.00M contrast to $18.00M a year ago, driven mainly by our $5.00M after-tax share of a restructuring charge at CPW in the year-ago duration. First-quarter net sales raised 2.0 percent in constant currency for Cereal Partners Worldwide (CPW), driven by growth in the UK & Australia, Latin America, and Asia, Middle East, and Africa regions, partially offset by declines in the continental Europe region. Constant-currency net sales for Häagen-Dazs Japan (HDJ) raised 6 percent, driven mostly by growth in core mini-cups.

Other Income Statement Items
Unallocated corporate items totalled $99.00M net cost in the 1st-quarter of fiscal 2k20, contrast to $106.00M net cost a year ago. Apart From mark-to-market valuation effects and other items affecting comparability, unallocated corporate items totalled $88.00M net cost this year contrast to $65.00M net cost previous year.

Restructuring, impairment, and other exit costs totalled $8.00M in the quarter contrast to a $1.00M net recovery a year ago. An additional $6.00M of restructuring and project-related charges were recorded in cost of sales this year contrast to $1.00M a year ago.

Net interest cost totalled $119.00M in the 1st-quarter contrast to $134.00M a year ago, driven by lower average debt balances and rates. The effective tax rate in the quarter was 11.70 percent contrast to 22.60 percent previous year (please see Note 5 below for more information on our effective tax rate). The adjusted effective tax rate was 20.90 percent contrast to 22.70 percent a year ago.

Cash Flow Generation and Cash Returns
Cash offered by operating activities totalled $572.00M in the 1st-quarter of fiscal 2k20, down 6.0 percent from the previous year, mainly driven by changes in inventory and deferred income taxes, partially offset by higher net earnings. Capital investments totalled $70.00M contrast to $113.00M a year ago. Dividends paid totalled $298.00M. Average diluted shares outstanding for the 1st-quarter raised 1.0 percent to 612.00M.

Fiscal 2k20 Outlook
General Mills reaffirmed its key full-year fiscal 2k20 targets:

  • Organic net sales are expected to incline 1.0 to 2.0 percent. The combination of currency translation, the impact of divestitures executed in fiscal 2k19, and contributions from the 53rd week in fiscal 2k20 are now expected to incline stated net sales by about 1.0 percentage point.
  • Constant-currency adjusted operating profit is expected to incline 2.0 to 4.0 percent from the base of $2.860B stated in fiscal 2k19.
  • Constant-currency adjusted diluted EPS are expected to incline 3.0 to 5.0 percent from the base of $3.220 earned in fiscal 2k19.
  • The company anticipates free cash flow conversion of at least 95.00 percent of adjusted after-tax earnings.

 

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