General Mills Profit Falls Short of Views

General Mills said Thursday quarterly profits rose 1%, as restructuring, marketing and commodity costs offset the benefit of higher sales.

Shares of the company , which has seen higher costs eat into profit margins, were recently down 1.5%, as the results were slightly lower than expected.

The Minneapolis-based maker of Cheerios cereal and Yoplait yogurt said net income in the fourth quarter ended May 27 rose to $224 million, or 62 cents a share, from $222 million, or 61 cents a share, a year ago.

Mark Lennihan

Cheerios

Analysts, on average, estimated the company would earn 63 cents a share, according to Thomson Financial.

Sales rose 6.9% to $3.1 billion, outpacing 5% unit volume growth. Volume measures sales growth without the impact of price changes and foreign currency translation.

U.S. retail segment sales rose 6% in the quarter, though operating profit in that segment fell 2%, primarily do to the increased marketing spending.

Sales of the company's Big G cereals - Cheerios, Wheaties, among others - also rose 6% during the quarter, a spokeswoman told Reuters.

Like other food companies, General Mills has been hurt by increases in commodity costs. In the coming fiscal year, it expects raw material costs to rise by as much as 5% from fiscal 2007. In addition, it is planning to invest more on its consumer marketing.

For fiscal 2008, the company expects to earn between $3.39 and $3.43 a share, which would represent growth of 7% to 8% from its fiscal 2007 results.

The company also expects to meet its targeted sales growth, which calls for sales to rise by a low single-digit percentage rate.

"We expect fiscal 2008 to be another year of strong operating performance, consistent with our long-term goals," said Chief Executive Steve Sanger in a written statement.