General Mills: Achieves Record-Level Results in FY 2009

Minneapolis / MN. (gm) General Mills Inc. reported strong financial results for the fourth quarter and full 2009 fiscal year. Fiscal 2009 financial highlights: Net sales grew eight percent. Segment operating profit grew ten percent. Earnings per share grew two percent to 3,80 USD. Excluding certain items affecting comparability, earnings per share grew 13 percent to 3,98 USD, exceeding the consensus of analyst estimates. 2009 was a 53-week fiscal year, with the extra week falling in the fourth quarter.

For the fiscal year ended May 31, 2009, General Mills net sales grew eight percent to 14,7 billion USD. Volume (measured in pounds) contributed two points of sales growth. Foreign currency translation reduced sales growth by two percentage points. Gross margin essentially matched prior-year levels despite nine percent inflation in the company´s input costs. Consumer marketing investment rose 16 percent in 2009, including strong growth in worldwide media spending. Segment operating profit increased ten percent to exceed 2,6 billion USD. During 2009, the company incurred restructuring expenses totaling 42 million USD pre-tax, and recorded a net pre-tax gain of 85 million USD from divestitures. Net earnings grew one percent to 1,3 billion USD including a net decline in mark-to-market valuation of certain commodity positions, the net gain from divestitures, proceeds from an insurance recovery, and expense associated with a discrete tax item. Diluted earnings per share (EPS) grew two percent to reach 3,80 USD. Earnings per share excluding the mark-to-market, divestiture, tax and insurance items would total 3,98 USD, a 13 percent increase from comparable earnings of 3,52 USD per share in fiscal 2008.

Chairman and Chief Executive Officer Ken Powell said, «In today´s very challenging economic environment, our leading food brands offer the quality, convenience and value that consumers are looking for and, as a result, our businesses are showing strong growth. In 2009, we held our margins in the face of sharply higher input costs, and we significantly increased the level of consumer marketing support for our brands. These actions have positioned General Mills to achieve another year of good growth in fiscal 2010».

Fourth quarter highlights

Fourth quarter highlights were: Net sales rose five percent. Segment operating profits grew 29 percent. Earnings per share totaled 1,07 USD. Excluding items affecting comparability of results, fourth-quarter EPS totaled 0,86 USD, up 18 percent from 0,73 USD last year. The 2009 fourth quarter included 14 weeks.

Net sales for the fourth quarter grew five percent to 3,6 billion USD. Pound volume growth contributed three points of the sales increase. Foreign currency translation reduced sales growth by three points. Gross margin recovered from depressed prior-year levels. Consumer marketing spending in the final quarter grew 19 percent and, even with that strong reinvestment, segment operating profits rose 29 percent. Earnings after tax totaled 359 million USD, reflecting a net gain from mark-to-market valuation of certain commodity positions and a lower fourth-quarter tax rate. Diluted earnings per share reached 1,07 USD compared to 0,53 USD in last year´s fourth quarter. Excluding a loss on product lines divested in the fourth quarter of 2009, and the mark-to-market effects in both 2008 and 2009, EPS would have totaled 0,86 USD, up 18 percent from 0,73 USD last year.

U.S. Retail Segment Results

Fiscal 2009 net sales for General Mills´ U.S. Retail operations grew eleven percent to exceed ten billion USD for the first time. Pound volume gains contributed four points of the net sales growth. Segment operating profits rose twelve percent to 2,2 billion USD, including a 19 percent increase in consumer marketing spending to support the company´s brands.

Fourth-quarter U.S. Retail net sales rose twelve percent, with pound volume contributing three points of the growth. All seven operating divisions posted net sales increases, and for Big G cereals, Pillsbury USA, Baking Products, Yoplait and Small Planet Foods fourth-quarter sales grew double-digit. Operating profits rose 30 percent even with a 25 percent increase in consumer marketing spending in the period. This brand-building investment is expected to help drive continued good net sales growth into fiscal 2010.

International Segment Results

Net sales for General Mills´ consolidated International businesses grew one percent in fiscal 2009 to 2,6 billion USD. Pound volume grew one percent, and foreign currency exchange reduced net sales growth by nine percentage points. On a constant-currency basis, sales grew ten percent overall and the company recorded sales growth in every region where it operates. In the Asia / Pacific region, constant-currency net sales grew 16 percent. In the Latin America region, net sales increased 22 percent. Net sales in Canada grew seven percent. And in Europe, constant-currency net sales grew four percent. International segment operating profits declined three percent as foreign currency exchange reduced profit growth by 14 percentage points.

In the fourth quarter, International segment net sales declined five percent as reported, but foreign currency exchange reduced net sales growth by 17 percentage points. On a constant-currency basis, net sales increased twelve percent with pound volume up five percent in the quarter. Segment operating profits declined twelve percent to 54 million USD, reflecting negative foreign currency exchange effects.

Bakeries and Foodservice Segment Results

Net sales for the Bakeries and Foodservice segment grew one percent to exceed 2,0 billion USD. Pound volume declined six percent, reflecting weak foodservice industry trends. However, segment operating profits grew three percent to reach 171 million USD. Prior-year results for Bakeries and Foodservice included unusually strong grain merchandising earnings that resulted from significant commodity price increases that year. Excluding grain merchandising earnings from both 2009 and 2008 results, Bakeries and Foodservice operating profits grew 15 percent in 2009, reflecting successful efforts to emphasize higher-margin product lines and customer channels.

In the fourth quarter, Bakeries and Foodservice net sales declined nine percent, including the divestiture of two product lines. Pound volume essentially matched year-ago levels, and operating profits rose sharply primarily due to lower input costs year-over-year.