) reported fourth quarter 2012 results with adjusted earnings
(excluding mark-to-market effects and restructuring costs) of 60
cents per share climbing 15% from the prior-year quarter. The
upside was driven by positive top-line growth and cost savings
despite significant input cost pressures. The quarterly earnings
also beat the Zacks Consensus Estimate by 2 cents.
Revenues and Margins
Total revenue of the global consumer food company increased 12%
year over year to $4.07 billion benefiting mainly from the addition
of Yoplait entities, which were acquired in July last year. The
Yoplait yogurt acquisition added 9 percentage points to revenue
growth; price/mix added 1 percentage point while volume contributed
12 percentage points.
Foreign exchange pulled down the top line by 1 percentage point.
Revenues marginally missed the Zacks Consensus Estimate of $4.12
However, higher input cost inflation and lower U.S. retail
volumes dragged the quarter's adjusted gross margin down by 140
basis points (bps) to 37.2%. Adjusted operating margin still
expanded 40 bps to 16.2% in the quarter due to the company's
Revenues from the U.S. Retail segment rose 3% year over year to
$2.4 billion in the quarter as benefits from price/mix was partly
offset by weak volume trends. Price/mix added 10 percentage points
to sales growth which was offset by a 7 percentage point headwind
from pound volume. Segment operating profit increased 4% to $536
million despite higher input costs, lower volumes, as well as
rising advertising costs.
The best-performing segment at General Mills was once again its
International operations, which grew 46% year over year to $1.1
billion. Volume added 75 percentage points, all from the Yoplait
acquisition, while price/mix took away 23 percentage points from
net sales growth. Foreign exchange had an unfavorable 6 percentage
point impact on net sales. Segment operating profit was up 66% to
On a year-over-year basis, the Bakeries and Foodservice
segment's quarterly revenue improved 2% to $511.0 million. It was
driven by volume gains, with price mix reducing revenue growth by
1%. Segment operating profit declined 10% year over year to $81
In fiscal 2012, the company witnessed a 12% increase in revenue
to $16.7 billion, exactly in line with the Zacks Consensus
Estimate. The annualized growth was driven mainly by the Yoplait
deal. Adjusted earnings (excluding mark-to-market effects and
restructuring charges) were $2.56 per share, which beat the Zacks
Consensus Estimate by 2 cents and the year-ago results by 12 cents
despite record commodity cost inflation. In fiscal 2012, commodity
inflation was 10%, the highest in the last 30 years.
This fiscal year, the company launched many new products, with
the most successful being Fiber One 90-calorie brownie snack bars,
Peanut Butter Multi-Grain Cheerios and Yoplait yogurt and granola
parfaits. The company also increased its brand marketing
investments and took strategic actions which resulted in
better-than-expected top- and bottom-line growth.
General Mills' board of directors very recently announced an 8%
increase in the quarterly dividend, resulting in an annualized
dividend rate of $1.32 per share. The new quarterly dividend of 33
cents will be paid on August 1, 2012, to shareholders of record
July 10, 2012.
The company expects to post mid single-digit growth in sales to
be driven by increased marketing investments for North American
Yoplait yogurt businesses and expanded growth in emerging markets,
especially China. Consumer food companies are expanding focus on
the fast growing emerging markets, which have a better growth
outlook than the North American and European markets which are
suffering from saturation, constrained consumer spending and
increased competitive activity.
Operating margins are expected to outstrip top-line growth due
to the company's cost-saving efforts under its holistic margin
management ("HMM") initiative.
Management expects fiscal 2013 adjusted earnings to be
approximately $2.65 a share, below the Zacks Consensus expectation
of $2.75. The guidance includes headwinds of 2-3 cents from the
acquisition of Yoki Alimentos, S.A., a Brazilian food company,
which is expected to close in the first half of the fiscal
While increased pension expenses and a higher tax rate are
likely to temper earnings growth by 8 cents, share buyback is
expected to provide downside support. Media investment is expected
to be at least similar to the 2011 level of $914 million.
GENL MILLS (GIS): Free Stock Analysis Report
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