General Mills Profits Fall on Higher Costs
General Millssaid on Wednesday higher grain and energy prices would drive up its costs 9 percent in the current fiscal year, and it posted a fourth-quarter profit decline it warned about a week ago.
But the maker of Cheerios cereal, Yoplait yogurt and Progresso soup said quarterly profit rose excluding a charge for the change in market value of commodity positions it holds, matching its forecast.
Price increases helped offset the impact of soaring commodity costs.
General Mills said net profit was $185.2 million, or 53 cents a share, in the fiscal fourth quarter ended May 25, down from $224.1 million, or 62 cents a share, a year earlier.
Excluding the reduction in the value of commodity positions, it earned 73 cents a share, in line with analysts' expectations, according to Reuters Estimates.
Like other food companies, General Mills has had to cope with soaring costs for energy and for ingredients such as wheat. The company has raised prices and found a variety of ways to cut costs while still investing in marketing and product development.
In the fourth quarter, sales rose 13 percent to $3.5 billion. Higher prices and a shift in sales to costlier items accounted for 8 percentage points of the increase, the weaker dollar added 2 percentage points, and volume added 3 percentage points.
Sales in the company's U.S. retail segment rose 9 percent, with volume up 6 percent. Yoplait, the company's "Big G" cereals and its Pillsbury products led the sales increase.
International sales rose 21 percent, though volume was up only 3 percent.
General Mills repeated its forecast for fiscal 2009 earnings of $3.78 to $3.83 a share, assuming no impact from changes in the value of its commodity holdings. Analysts' average forecast is $3.79.
The company forecast fiscal 2009 sales would grow at a mid-single-digit rate.
General Mills shares closed at $62.40 on Tuesday on the New York Stock Exchange. They are up more than 9 percent this year, compared with a 3.5 percent decline in the Standard & Poor's U.S. packaged foods index.