Despite significant restructuring following the acquisition of Pillsbury in 2001, US bakery and foods giant General Mills is reported to be satisfied with its overall results for the first quarter of fiscal 2004.
"Our worldwide unit volume was up 3 per cent, led by our US retail businesses," said chairman Steve Sanger. "Our earnings growth also reflected productivity gains and higher joint venture earnings. These results put us on track to meet our expectations for the full year."
Nonetheless, the company experienced a decline in sales in some key sectors. For example, net sales for the company's bakeries and foodservice operation fell 2 per cent to $428 million, with unit volume down 4 per cent. Operating profits totalled $29 million, down from $53 million in last year's first quarter but in line with fiscal 2003 second half performance.
The company claims that the decline in profits reflects lower volumes and higher supply chain costs caused by the manufacturing realignment activities currently underway.
The corporation performed better in a number of other food sectors. Snacks unit volume grew 8 per cent led by Nature Valley granola bars and Pop Secret popcorn. Pillsbury USA unit volume grew 4 per cent, including gains by Totino's snacks and pizzas, Pillsbury refrigerated cookies, and frozen baked goods. Big G cereal volume declined by 2 per cent, compared to 6 percent growth in the first quarter of fiscal 2003.
General Mill's meals division made the strongest contribution to the unit volume performance, with a 7 per cent overall increase, led by Progresso soups, Green Giant vegetables and dinner mixes. The group's Yoplait brand yoghurt volume grew 11 per cent, with good performance by core established lines and the national expansion of Nouriche yoghurt beverages.
Earnings after tax from joint ventures totalled $20 million in the first quarter, compared to $17 million a year earlier. Profits for Cereal Partners Worldwide (CPW) joint venture with Nestle and Snack Ventures Europe (SVE) joint venture with PepsiCo together totalled $15 million, up 36 per cent from the first quarter a year ago.
In addition, net sales for General Mills' consolidated international businesses grew 17 per cent to $367 million due to currency effects and unit volume growth. Unit volume for these businesses grew by 4 per cent, with gains in Canada, Asia and Europe offsetting declines in Latin America. Operating profits grew 9 per cent to $24 million. Overall net sales for the 13 weeks ended 24 August 2003 grew 7 per cent to $2.52 billion. Earnings after tax grew 29 per cent to $227 million, and net diluted earnings per share (EPS) increased 26 per cent from 47 cents in last year's first quarter to 59 cents this year.
"Our first quarter gives us a good start heading into the fall and winter seasons, our largest earnings period of the year," said Sanger. "We expect our US retail businesses to lead our growth again in the second quarter, offsetting continued weakness in bakeries and foodservice."
Sanger said the company is on track to achieve its fiscal 2004 financial targets, which include net sales growth of 6 per cent and net diluted earnings per share of $2.85 to $2.90, up from $2.43 earned in fiscal 2003. The fiscal 2004 EPS target includes the cost of Pillsbury restructuring, and other exit and merger-related costs.