General Mills Reports Fiscal 2008 Results

Business Wire,  June 25, 2008  

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Net Sales Grew 10 Percent to $13.7 Billion

Segment Operating Profits Increased 6 Percent to $2.4 Billion

Net Earnings Totaled $3.71 per Share Including Certain Non-cash Items

Company Sees Growth Continuing in Fiscal 2009

MINNEAPOLIS -- General Mills (NYSE: GIS) today reported results for the fourth quarter and full 2008 fiscal year. For the fiscal year ended May 25, 2008, General Mills net sales grew 10 percent to $13.7 billion. Volume (measured in pounds) contributed 3 points of sales growth. Segment operating profits grew 6 percent to $2.4 billion despite higher input costs and a 13 percent increase in consumer marketing expense. Net earnings grew 13 percent to $1.3 billion including non-cash net gains from mark-to-market valuation of certain commodity positions and a favorable ruling related to a tax contingency. (These non-cash items are discussed in the section titled Corporate Items below). Diluted earnings per share (EPS) totaled $3.71 including $0.19 from the commodity and tax items. Excluding these items, earnings per share would have totaled $3.52 for the year, up 11 percent from reported earnings of $3.18 per share a year ago.

Chairman and Chief Executive Officer Ken Powell said, "Fiscal 2008 was a strong year for General Mills. Sales and operating profit grew for all three of our major business segments. We posted particularly good growth in the fourth quarter, and we've carried momentum into the start of 2009."

Fourth Quarter Results

Net sales for the fourth quarter of 2008 increased 13 percent to $3.5 billion. Volume contributed 3 points of sales growth, pricing and mix added 8 points, and foreign currency exchange accounted for 2 points of growth. Segment operating profits of $517 million rose 5 percent, despite higher input costs and a 20 percent increase in consumer marketing expense in the quarter. Net earnings were $185 million including a reduction of the mark-to-market valuation of certain commodity positions from a net gain of $168 million at the end of the third quarter to a net gain of $57 million at the end of the fiscal year. This reduction was primarily due to declines in key commodity market prices from the prevailing levels recognized last quarter. Excluding this $111 million pre-tax mark-to-market reduction, diluted earnings per share would have been 73 cents, up 18 percent from 62 cents per share reported for the fourth quarter a year ago.

U.S. Retail Segment Results

Fiscal 2008 net sales for General Mills' domestic retail operations grew 7 percent to nearly $9.1 billion with volume contributing 3 points of growth. Segment operating profits rose 4 percent to reach $2.0 billion, including a 12 percent increase in consumer marketing expense.

Net sales for the Snacks division increased 12 percent in 2008, led by grain snacks such as Nature Valley granola bars and Fiber One bars. Yoplait sales grew 10 percent, fueled by Yoplait Light yogurt, Yo-Plus yogurt with probiotic cultures and fiber, and new Fiber One yogurt. Net sales for the Baking Products division grew 9 percent including gains for Betty Crocker cookie mixes, Gold Medal flour and the launch of Warm Delights Minis microwavable desserts. Small Planet Foods sales were up 6 percent. Big G cereals net sales rose 5 percent, with strong performance from core brands including Fiber One and the market-leading Cheerios franchise. The Meals division posted a 5 percent net sales increase, led by Progresso ready-to-serve soups. Sales for Pillsbury USA also grew 5 percent, reflecting growth by Totino's frozen pizza and hot snacks, and Pillsbury refrigerated baked goods.

For the fourth quarter, U.S. Retail net sales grew 9 percent with volume up 6 percent. Yoplait, Big G and Pillsbury USA led the growth. Operating profit increased 5 percent, including 20 percent growth in consumer marketing expense for the period.

International Segment Results

Net sales for General Mills' consolidated international businesses grew 21 percent in 2008 to $2.6 billion. Volume contributed 6 points of growth, price and mix were up 6 points, and favorable currency exchange added another 9 points. The company recorded sales growth in every region where it operates. In Canada, net sales grew 14 percent for the year, primarily reflecting favorable currency exchange. Net sales in Europe rose 19 percent. In the Asia-Pacific region, net sales grew 25 percent, and net sales in Latin America were up 31 percent. International segment operating profits rose 25 percent to $269 million despite higher input costs and double-digit growth in consumer marketing expense.

For the fourth quarter, International net sales grew 21 percent to $681 million. Volume increased 3 percent, price and mix contributed 9 points of growth, and foreign currency exchange added the remaining 9 points. Fourth-quarter operating profits rose 10 percent to $61 million.

Bakeries & Foodservice Segment Results

Net sales for the Bakeries & Foodservice division grew 11 percent to exceed $2.0 billion. Pricing actions related to higher input costs more than offset a 3 percent volume decline attributable in part to the absence of volume from businesses divested in the past year. Sales in the bakery channel were up 19 percent, and sales to foodservice distributors and restaurant customers grew at a mid single-digit rate. Pricing and grain merchandising earnings drove 12 percent operating profit growth for the year.