General Mills posted higher-than-expected quarterly earnings on Wednesday and raised its full-year outlook only slightly as it sees higher ingredient costs, a higher tax rate and a possible currency devaluation in Venezuela.
The foods maker behind Cheerios cereal, Progresso soups and Haagen Dazs ice cream said it expects ingredient costs inflation at the high end of its 2 percent to 3 percent forecast due to the summer drought in the U.S. Midwest that pushed up prices for corn and other grains.
In addition, General Mills expects a higher tax rate in the second half of its fiscal year than in the first and is anticipating a possible currency devaluation in Venezuela.
"As we move into the second half, the global operating environment remains challenging,'' said Chief Executive Ken Powell.
In the company's fiscal second quarter, ended Nov. 25, net earnings rose to $541.6 million, or 82 cents per share, from $444.8 million, or 67 cents per share, a year earlier. Excluding items, earnings were 86 cents per share, topping analysts' average estimate of 79 cents per share, according to Thomson Reuters I/B/E/S.
Sales increased nearly 6 percent to $4.88 billion, meeting analysts' expectations, helped by the recently acquired Yoki Alimentos business in Brazil.
The company now expects to earn $2.65 per share to $2.67 per share in fiscal 2013, excluding accounting adjustments, a tax benefit and restructuring and integration costs. Its earlier forecast called for earnings of about $2.65 per share.
The food maker's shares rose in pre-market trading before the opening bell, following the news. (Click here to get real-time quotes for General Mills.)