Packaged food supplier General Mills, Inc. (GIS) reported Wednesday a modest growth in its third-quarter profit, as impacts from one-time charges and margin pressure were more than offset by higher overseas sales, mainly from its new businesses. The results came in above analysts' estimates. The company lifted its fiscal 2013 adjusted earnings forecast and said it expects lower earnings in the fourth quarter.
Chairman and Chief Executive Officer Ken Powell said, "Our sales and volume growth reflects contributions from new businesses and from established products. Operating profit results for the quarter were particularly good, with double-digit increases for both our U.S. Retail and Bakeries and Foodservice segments."
In its recently concluded third quarter, net earnings attributable to company grew 1.8 percent to $398.4 million from $391.5 million, and earnings per share rose 3.4 percent to $0.60 from $0.58 last year.
Excluding certain items affecting comparability, adjusted earnings per share grew 16 percent to $0.64. On average, 16 analysts polled by Thomson Reuters expected earnings of $0.57 per share for the quarter. Analysts' estimates typically exclude one-time items.
Quarterly net sales increased 7.5 percent to $4.43 billion and beat consensus estimates of $4.36 billion. New businesses, such as Yoki Alimentos in Brazil and Yoplait Canada, contributed 6 points of net sales growth. Excluding new businesses, net sales were up 2 percent with 1 point of growth from higher pound volume.
International businesses revenues grew 24.5 percent, including 20 points of sales growth from new businesses, with sales up 16 percent in the Asia / Pacific region, sales more than doubling in Latin America including Yoki, and sales up 21 percent in Canada, including Yoplait.
In the quarter, gross margin, however, declined 60 basis points to 34.9 percent primarily reflecting an 11.3 percent increase in cost of sales. Operating profit declined 4 percent reflecting lower operating expenses, while adjusted segment operating profit grew 11 percent to $749 million.
Looking forward to the fourth quarter, General Mills said it anticipates adjusted earnings per share to be below last year results that grew 15 percent. The forecast reflect the company's projection that supply chain costs and spending to support in-store merchandising would be above last year.
The company still estimates fiscal 2013 input cost inflation of 3 percent.
Further, General Mills raised its guidance for fiscal 2013 adjusted earnings to $2.66-$2.68 per share from previous forecast of $2.65-$2.67 per share. Analysts project full-year earnings of $2.68 per share.
Powell said, "We are continuing to see slow, but steady, improvement in the operating environment. Trends in our established businesses are improving, and integration of our new businesses is going smoothly.... our plans for fiscal 2014 call for high single-digit EPS growth, consistent with our long-term model."
In pre-market activity, General Mills shares are currently trading at $46.23, down $0.19 or 0.41 percent.
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