General Mills, Inc. (GIS) reported Wednesday a profit for the fourth quarter that edged up from last year, reflecting double-digit sales growth. However, the company issued a gloomy outlook due in part to rising grains prices.
Adjusted earnings per share for the quarter topped analysts' expectations by a penny, while quarterly revenues missed their estimates by a whisker.
The company provided an adjusted earnings forecast of $2.65 per share for the year, with Street currently looking for $2.75 per share. The company also sees net sales growth for the year at a mid-single-digit rate.
Like most packaged food companies, General Mills is witnessing improvement in sales with economic uncertainties forcing families to stick largely to eat-at-home habit. However, higher commodity costs and other production necessities like fuel continue to hit margins.
The branded foods giant noted earlier that fiscal 2012 is seeing the highest level of commodity inflation in 30 years.
General Mills' gross margin percentage for the fourth quarter contracted 70 basis points to 36.8 percent, reflecting 10 percent higher commodity costs and the change in business mix to include the Yoplait acquisition.
The company acquired a 51 percent controlling interest in Yoplait S.A.S. and a 50 percent interest in Yoplait Marques S.A.S. for $1.2 billion in July 2011.
The Minneapolis, Minnesota-based maker of Cheerios and Fiber One cereals reported net earnings of $325.4 million or $0.49 per share for the fourth quarter, slightly higher than $320.2 million or $0.48 per share in the prior-year quarter.
In May, the company said it will cut about 850 jobs worldwide as part of a restructuring plan to improve organizational efficiency and focus on key growth strategies. It also incurred a restructuring charge.
Excluding charges, adjusted earnings for the quarter increased to $403.8 million or $0.60 per share from the year-ago quarter's $344.2 million or $0.52 per share.
On average, 16 analysts polled by Thomson Reuters expected the company to earn $0.59 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter grew 11.9 percent to $4.07 billion from $3.63 billion in the same quarter last year, bit missed fourteen Wall Street analysts' consensus estimate of $4.11 billion by a whisker. Yoplait acquisition contributed 9 percentage points of net sales growth.
U.S. retail net sales grew 2.9 percent to $2.42 billion, and consolidated international sales surged 45.6 percent to reach $1.13 billion, helped by strong contribution from the Yoplait acquisition. Net sales for the bakeries and foodservice increased 1.7 percent to $510.8 million from last year.
For Fiscal 2013, net sales grew 12 percent to $16.7 billion, while net earnings declined to $1.57 billion or $2.35 per share from last year's $1.80 billion or $2.70 per share. Excluding items, adjusted earnings per share increased to $2.56 from $2.48 a year ago.
Street was looking for full-year 2012 earnings of $2.54 per share on annual revenues of $16.68 billion.
"We expect fiscal 2013 to be another year of good growth for General Mills, reflecting sales and profit increases from our base business along with contributions from newly acquired operations," Chairman and CEO Ken Powell said in a statement.
The company added that "We plan to balance our 2013 earnings growth with reinvestment designed to support our longer-term progress", with primarily investments designed to accelerate business growth in emerging markets, particularly China.
GIS closed Tuesday's regular trading session at $38.15, down $0.40 on a volume of 4.10 million shares, higher than the three-month average volume of 3.87 million shares. In the past 52-week period, the stock has been trading in a range of $34.64 to $41.06.
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