General Mills sales rise 6 per cent after restructuring

By Charlotte Eyre

- Last updated on GMT

Related tags Cent General mills

General Mills yesterday said it achieved growth in both annual net
sales and operating profits, after cutting ties with
underperforming sectors.

Net sales grew 6 per cent to $12.4bn (€9.2bn) for the financial year ended 27 May compared to the previous, outpacing 4 per cent growth in unit volume.

Operating profits increased 7 per cent to $2.3bn (€1.7bn) over the same period, the company said.

Margins were down slightly to 16.5 per cent from 16.7 per cent over the same period the previous year.

However, chairman and chief executive officer Steve Sanger remained optimistic that the company would meet its 2008 growth ambitions.

"We increased our level of consumer marketing investment, which will help sustain our brands' growth momentum going forward," he said.

The company has established a targeted range for 2008 earnings of 7 to 8 per cent from 2007 results.

"We expect fiscal 2008 to be another year of strong operating performance, consistent with our long-term goals," Sanger said.

"Our growth model calls for low single-digit growth in net sales and mid single-digit growth in segment operating profits".

The company had higher input costs and experienced double digit growth in marketing expense in the last quarter.

Sanger anticipates that this increase spend will continue in 2008, but he still expects to meet 2008 targets, " despite the estimated 5 per cent input-cost inflation and increased consumer marketing investment."

The snacks division came out on top in terms of net sales, increasing10 per cent to exceed $1bn (€0.7bn) for the first time.

The company accredited this success to the popularity of its brands such as Nature Valley granola and Fiber One bars.

Net sales for Pillsbury USA, a pizza, deserts and bread brand, and for the baking products division each grew 3 per cent.

Big G cereals posted a 2 per cent sales increase, led by a strong performance from the Cheerios franchise and other new cereals introduced into the market during the year, the company said.

International net sales grew 16 per cent in 2007 to exceed $2.1bn (€1.6bn), and unit volume grew 8 per cent.

General Mills restructured international operations last year in a bid to improve profits, and it recorded exit costs of $41m (€30m) in the fourth quarter of fiscal 2007.

Last month the company determined that certain product lines in the bakeries and foodservice segment were underperforming, so it recorded a non-cash impairment charge of $37 million against these assets It also sold the frozen pie product line at a loss of $4m (€2.9m), and spent $8m (€5.9m), on restructuring the Cereal Partners Worldwide plant in the UK, the company said.

General Mills markets over 100 brands worldwide including Pillsbury, Häagen-Dazs, Cheerios, Yoplait, Green Giant, Old El Paso, and Wheaties.

The firm is dominant in the US cereals market, where it is second only to Kelloggs.

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