General Mills Inc. (GIS) has reported results for the fourth quarter of fiscal 2011. For the quarter, adjusted earnings shot up by 26.8% to 52 cents a share compared with 41 cents in the year-ago period. The quarterly EPS was in line with the Zacks Consensus estimate.
The fiscal 2011 earnings went up by 7.82% to $2.48 a share compared to $2.30 a year ago. The fiscal earnings were also in line with the Zacks Estimate.
Management expects its fiscal 2012 earnings to be in the range of $2.60 – $2.62 a share.Excluding mark-to-market effects and the tax charge related to health care legislation, the fiscal 2011 earnings guidance reflects an annual growth of 5% – 6%.
Total revenue for the reported quarter grew only marginally by 3% year over year to $3,634.3 million. During the quarter volume slipped by 4%. Revenues were marginally short of the Zacks Consensus Estimate of $3.7 billion.
For the fiscal year 2011, reported revenue inched up by 1.7% to $14,880.2 million from $14,635.6 million in the previous year. The revenue for the fiscal 2011 missed Zacks Estimate of $14,927.0 million.
Mark-to-market effect, holistic margin management (HMM) cost savings and price realization boosted gross margin for the quarter to 37.5 %, which was higher than the year-ago level.
For the fiscal year 2011, gross margin expanded to 40%, reflecting increased mark-to-market valuation for certain commodity positions as well as effective HMM cost-saving initiatives.
Segments
Revenues form the U.S. Retail segment declined 2% year-over-year to $2,353.5 million in the quarter, reflecting significant year-over-year differences in in-store merchandising activity and pricing.
For the fiscal year 2011, net sales and pound volume for General Mills’ U.S. Retail operations remained same. Total U.S. Retail segment net sales were $10,163.9 million.
Revenue at the International segment grew 16% year over year in the quarter to $778 million, reflecting a 6 points volume (measured in pounds) growth 7 points contribution from currency translation and 3 points from net price realization and mix.
For fiscal 2011 consolidated International businesses grew by 7% in 2011 to $2,875.5 million. Pound volume contributed 6 points of net sales growth, and price and mix contributed 1 point of net sales growth.
Compared with the year-ago period, the Bakeries and Foodservice segment’s revenue improved by 11% to $502 million in fourth quarter 2011, demonstrating a strong contribution from net price realization and mix, and 4% from volume increase (measured in pounds).
For the fiscal year 2011, net sales grew 6% to $1,840.8 million with 6% contribution from pricing and mix.
In the quarter, operating profit at International segment rose sharply to $72 million. The U.S. Retail segment reported a growth of 4% in operating profit for the quarter. The Bakeries and Foodservice grew at a double digit rate.
Balance Sheet and Share Repurchase
The company exited the quarter with operating cash flow of $1,526.8 million, which was down 30% year over year from $2,181.2 million, primarily due to higher working capital requirements. Year-to-date General Mills repurchased 32 million shares of its common stock.
Shareholder dividends totaled $729 million in 2011, reflecting a 17 percent increase in the annual dividend paid on per share. On June 28, 2011, the company announced a 9% increase in the quarterly dividend rate, effective with the August 1, 2011 payment.
Recommendation
General Mills, which faces stiff competition from Kellogg Company (K) and Seneca Foods Corp. (SENEA) currently, holds a Zacks #3 Rank. On a long-term basis, the company retains a Neutral rating on the stock, with a short-term Hold rating.
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