General Mills, a long-time supplier of snacks to the vending industry, made news last year with its agreement to purchase the Pillsbury operations of Diageo plc (London, England) for $10.5 billion (see V/T, July 2000). That transaction is expected to be completed late this spring. The company has just published results for its third quarter and first nine months, ending February 27.
General Mills reported record sales and earnings for its fiscal 2001 third quarter. Diluted earnings per share totaled 54 cents, up 8 percent from the 50 cents per share earned in the same period last year. Earnings before interest and taxes increased 5 percent to $295.8 million. Third quarter interest expense was higher, as anticipated, due to increased debt levels associated with prior-year acquisitions and share repurchases. As a result, earnings after tax grew 3 percent to $157 million. Sales for the 13 weeks ended Feb. 25, 2001 grew 5 percent to $1.70 billion.
Chairman and chief executive officer Steve Sanger said the results met expectations for General Mills' current businesses. "Our worldwide unit volume grew 6 percent in the quarter, including strong contributions for new products introduced during this period," he commented. "Earnings growth was slightly lower in the quarter, consistent with the mix of sales. However, our current businesses remain on track to deliver double-digit EPS growth for the full 2001 fiscal year."
Through nine months, sales grew 5 percent to $5.27 billion. Earnings before interest and taxes rose to $948.3 million, up 7 percent from the previous year. Earnings after tax were up 3 percent to $519.1 million. Diluted earnings per share increased 10 percent to $1.78 from $1.62 a year ago, and diluted earnings per share, excluding goodwill amortization, also rose 10 percent to $1.84.
General Mills' domestic unit volume grew 4 percent in the quarter, on top of last year's strong performance when unit volume grew 8 percent. Convenience foods (snacks and yogurt) posted a 9 percent unit volume gain for the quarter. Yogurt volume increased at a double-digit pace, led by strong growth for the established "Yoplait" varieties, continued good performance by "Go-Gurt," and the national expansion of "Yoplait Expresse," the new yogurt in a tube for adults. Snacks growth included double-digit volume gains for fruit snacks, "Pop Secret" microwave popcorn, "Bugles" and "Nature Valley" granola bars.
Foodservice volume rose 9 percent in the quarter, led by good performance by snacks, refrigerated yogurt and cereal, and higher volume through convenience stores. Through nine months, combined volume for the company's domestic non-cereal business was up 8 percent.
"Big G" cereal shipments increased 1 percent in the quarter, on top of the 3 percent gain posted a year earlier. Expansion of new "Milk n' Cereal" bars and "Harmony" cereal for women to the remaining 75 percent of the U.S. drove "Big G's" growth. "Big G" expects its consumer volume trends to improve in the fourth quarter, as marketing activity accelerates behind new products, including the April launch of "Wheaties Energy Crunch" cereal.
Combined unit volume for "Betty Crocker" products was down 2 percent. Unit volume for "Betty Crocker" baking products was flat. "Betty Crocker" dinner and side dish volume was lower, reflecting difficult comparisons for "Helper" dinner mixes. However, retail takeaway for "Helper" dinner mixes increased 7 percent in the quarter, and is up 5 percent this year to date.
"General Mills' current businesses continue to deliver solid topline and bottomline growth," said Sanger. "In addition, we expect our acquisition of Pillsbury to close late in our fourth quarter. Our integration plans are complete, so as soon as we receive regulatory clearance, we'll be ready to go."
Through nine months, the company has repurchased approximately 4.8 million shares at an average price of $.33 per share. As a result of the company's share repurchase program, average basis shares outstanding for the quarter declined 5 percent to 284.3 million. Average diluted shares were down 4 percent, to 293.8 million.