Food Business News - July 5, 2011 - 20

Strong Q4 contributes to yearly proﬁt at General Mills
But higher input costs weigh on U.S. Retail business during the year

MINNEAPOLIS — N Net i income at General Mills, Inc. rose 18% in fiscal 2011, lifted by an increase in mark-tomarket valuation of certain commodity positions along with a net benefit from certain tax items. Full-year results also benefitted from a strong fourth quarter, in which higher sales helped to drive a 51% gain in earnings. Net income in the year ended May 29 totaled $1,798.3 million, equal to $2.80 per share on the common stock, up from $1,530.5 million, or $2.32 per share, in the same period a year ago. Net sales in the year rose 2% to $14,880.2 million from $14,635.6 million. General Mills attributed 1 percentage point of net sales growth to increased pound volume and 1 point to price and mix. For the fourth quarter ended May 29, net income was $320.2 million, or 50c per share, up from $211.9 million, or 32c per share, in the same period a year ago. Net sales were $3,634.3 million, up 3% from $3,529.2 million. “This past year represented a challenging operating environment for food manufacturers, as we experienced the return and rapid acceleration of cost inflation for various food ingredients and energy,” said Ken Powell, chairman and chief executive officer. “We’re generally pleased with our 2011 sales and profit results, which met the key targets we set for the year and represent performance consistent with our long-term growth model.” Despite a gain of 4% in the fourth quarter, operating proﬁt within the company’s U.S. Retail segment fell 2% during ﬁscal 2011 to $2,347.9 million, bogged down by higher input costs. Net sales for the full year were down 0.4%, to $10,163.9 million.

“N “Net sales f the Bi G cereal di i i l for h Big l division were 2% below year-ago sales that grew 5%,” General Mills said. “Meals division net sales declined 1%, as growth for Old El Paso Mexican products, Progresso soup, and Wanchai Ferry and Macaroni Grill frozen entrees was offset by softness in Helper dinner mixes and Green Giant

d bl Pill b di i i canned vegetables. Pillsbury division net sales declined 2%, reflecting lower sales for Totino’s frozen pizza. “Baking Products division net sales were 4% below year-ago results. Snacks division net sales grew 5% in fiscal 2011, led by Nature Valley and Fiber One grain snack bars. Yoplait division net sales grew 1%, and net sales for the Small Planet Foods organic and natural foods division rose 13%, led by double-digit growth by Larabar fruit and nut bars.” In a conference call with ﬁnancial analysts on June 29, Mr Powell provided his outlook for some of the macro trends affecting food and beverage manufacturers.

“W d ’ f d f “We don’t see food away from h home growing over the next few years …, but that sector has stabilized and so we don’t really see the dramatic shifts into the grocery right now,” he said. “Although obviously there is good traffic in grocery stores, but we don’t see that shift and we do see the consumer — as you know, it is a slow recovery.” General Mills said media expense for the segment, which rose 22% in fiscal 2010, fell 9% during fiscal 2011. Operating profit in the Bakeries and Foodservice segment rose 51% in the fourth quarter and 16% in the full year, while sales increased 11% and 6% in the fourth quarter and full year, respectively. At $306.3 million, fiscal 2011 operating profit within the segment was driven by net price realization, effective customer channel and product strategies, and increased grain merchandising earnings, the company said. Full-year net sales in the Bakeries and Foodservice segment, at $1,840.8 million, benefitted from 6 percentage points of growth related to pricing and mix, while pound volume essentially matched prior-year levels. “Net sales to food service distributors and operators grew 3%, net sales to convenience store and vending customers grew 11%, and net sales to bakery and national restaurant accounts increased 6%,” General Mills said. Operating profit in the International segment totaled $291.4 million in fiscal 2011, up 52% from fiscal 2010, driven in large part by a gain of 81% in the fourth quarter. Net sales rose 7% for the year to $2,875.5 million, and 17% for the fourth quarter, to $778.5 million. General Mills said pound volume

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July 5, 2011

Food Business News - July 5, 2011

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