Minneapolis / MN. (gm) General Mills Inc. reported results for its fiscal 2024 second quarter. «While we saw a slower-than-expected volume recovery in the second quarter amid a continued challenging consumer landscape, we generated bottom-line growth thanks primarily to strong HMM cost savings,» said Chairman and CEO Jeff Harmening. «We’re adapting our plans to the evolving consumer environment and staying focused on driving long-term growth, with a priority on winning through innovation, brand building, and in-store execution. At the same time, we’re stepping up our HMM performance and further eliminating disruption-related costs in the supply chain. For the full year, we’ve revised our topline outlook to account for a slower volume recovery, narrowed our profit and EPS expectations within our original guidance ranges, and maintained our outlook for strong free cash flow conversion.»
General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and standing for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to reshaping its portfolio with strategic acquisitions and divestitures to further enhance its growth profile.
Second Quarter Results Summary
- Net sales were down 2 percent to USD 5.1 billion, with lower pound volume partially offset by favorable net price realization and mix. Organic net sales were 2 percent below year-ago results that grew double digits; organic net sales were up 4 percent on a 2-year compound growth basis.
- Gross margin was up 170 basis points to 34.4 percent of net sales, driven by HMM cost savings and favorable net price realization and mix, partially offset by input cost inflation, higher other supply chain costs, and supply chain deleverage. Adjusted gross margin was up 180 basis points to 35.0 percent of net sales, driven primarily by HMM cost savings and favorable net price realization and mix, partially offset by input cost inflation, higher other supply chain costs, and supply chain deleverage.
- Operating profit of USD 812 million was up 2 percent, driven by higher gross profit dollars and lower compensation and benefits expenses, partially offset by a goodwill impairment charge related to the Latin America reporting unit. Operating profit margin of 15.8 percent was up 50 basis points. Adjusted operating profit of USD 989 million increased 13 percent in constant currency, driven by higher adjusted gross profit dollars and lower compensation and benefits expenses. Adjusted operating profit margin was up 240 basis points to 19.3 percent.
- Net earnings attributable to General Mills of USD 596 million were down 2 percent. Diluted EPS was up 1 percent to USD 1.02, driven primarily by higher operating profit and lower net shares outstanding, partially offset by higher net interest expense. Adjusted diluted EPS of USD 1.25 was up 14 percent in constant currency, driven primarily by higher adjusted operating profit and lower net shares outstanding, partially offset by higher net interest expense.
Six Month Results Summary
- Net sales increased 1 percent to USD 10.0 billion, driven by favorable net price realization and mix, partially offset by lower pound volume. Organic net sales were 1 percent above year-ago results that grew double digits; organic net sales were up 6 percent on a 2-year compound growth basis.
- Gross margin was up 350 basis points to 35.2 percent of net sales, driven by favorable net price realization and mix, HMM cost savings, and favorable mark-to-market effects, partially offset by input cost inflation, higher other supply chain costs, and supply chain deleverage. Adjusted gross margin was up 120 basis points to 35.2 percent of net sales, driven by favorable net price realization and mix and HMM cost savings, partially offset by input cost inflation, higher other supply chain costs, and supply chain deleverage.
- Operating profit of USD 1.7 billion was down 8 percent, driven primarily by net gains on divestitures in the prior year and a goodwill impairment charge related to the Latin America reporting unit, partially offset by higher gross profit dollars. Operating profit margin of 17.3 percent was down 170 basis points. Adjusted operating profit of USD 1.9 billion increased 7 percent in constant currency, driven by higher adjusted gross profit dollars, partially offset by higher adjusted selling, general, and administrative (SG+A) expenses, including a high-single-digit increase in media investment. Adjusted operating profit margin was up 110 basis points to 18.8 percent.
- Net earnings attributable to General Mills were down 11 percent to USD 1.3 billion and diluted EPS was down 8 percent to USD 2.16, driven primarily by lower operating profit and higher net interest expense, partially offset by lower net shares outstanding. Adjusted diluted EPS of USD 2.34 was up 6 percent in constant currency, driven primarily by higher adjusted operating profit and lower net shares outstanding, partially offset by higher net interest expense and a higher adjusted effective tax rate.
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