General Mills CEO ‘disappointed’ with bottom line results for Q3 2018

By Gill Hyslop contact

- Last updated on GMT

General Mills has posted third quarter earnings well below its expectations. Pic: Deposit Photos/jetcityimage
General Mills has posted third quarter earnings well below its expectations. Pic: Deposit Photos/jetcityimage
General Mills reported a 6% drop in third-quarter operating profit, well below its expectations, said chairman and CEO Jeff Harmening, adding cost pressures will influence its full-year outlook.

The Cheerio’s cereal maker posted a third-quarter total segment operating profit of $628m, down 6% from the same period a year earlier.

“Like the broader industry, we’re seeing sharp increases in input costs, including inflation in freight and commodities,”​ said Harmening said in a statement, noting improved volume performance is also incurring higher operational costs.

Amended outlook

The Minneapolis-based food giant now expects fiscal 2018 adjusted earnings per share (EPS) to grow by 1% from the base of $3.08 earning in F2017, compared to its prior forecast of a 3%-4% increase.

Constant-currency total segment operating profit is now forecast to decline by 5%-6% versus previous expectations of 1%, while organic net sales are expected to be in line with last year, which is unchanged from previous guidance.

Highlights

  • Net sales increased 2% to $3.88bn versus $3.79bn the year prior
  • Operating profit increased 9% to $597.2m from $542.5m
  • Total segment operating profit was down 6% in constant currency
  • Diluted earnings per share (EPS) were $1.62 compared to $0.61 a year ago; adjusted diluted EPS totaled $0.79, up 8% in constant currency

For the third quarter ended February 25, 2018, the company reported net sales rose 2.3% to $3.88bn, ahead of analyst forecasts of $3.78bn.

Net income more than doubled to $941.4m, helped by a one-time tax benefit of $504m from changes in the US tax code.

Operating profit was up 9% to $597.2m – compared to $542.4m the year prior – mainly due to lower restructuring, impairment and other exit costs.

The company said it has taken actions to improve profitability in the near term, and has launched initiatives that will reduce long-term cost structure.

These include various actions to mitigate rising freight costs; increasingly tight control of all expenditures in the balance of fiscal 2018; and targeted strategic revenue management actions to improve net price realization.

“While these actions will only partially offset the cost headwinds in fiscal 2018, we are confident they will strengthen our bottom-line results beginning in fiscal 2019,”​ added Harmening.

Additionally, the company said it will continue to pursue divestitures of growth-dilutive businesses to further reshape its portfolio.

 

Pic credit: Deposit Photos​/jetcityimage

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