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General Mills reports 29% increase in 1st quarter

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MINNEAPOLIS — General Mills Inc. on Tuesday reported its first fiscal quarter earnings climbed 29 percent from a year earlier, as it introduced 70 new products and continued to work through its acquisition of Pillsbury.

The company acknowledged some remaining problems with combining production with the former Pillsbury brands as it earned $227 million, or 59 cents a share, for the quarter ending Aug. 24. That's compared with $176 million, or 47 cents a share, a year earlier.

The maker of Cheerios cereal and Progresso soup said earnings would have been 62 cents a share in the latest quarter if costs arising from the 2001 Pillsbury acquisition were excluded. That matched the consensus estimate of analysts surveyed by Thomson First Call.

Net sales for the quarter were $2.52 billion, up from $2.36 billion the year earlier.

The Golden Valley-based food manufacturer saw net sales in its U.S. retail operations grow 7 percent to $1.72 billion. The unit's meals division led the growth, with a 7 percent increase in volume, led by Green Giant vegetables and dinner mixes.

Sales increased for all of the company's retail divisions except Progresso Soup and Big G cereals.

Chairman and chief executive Steve Sanger said the Progresso sales decline was seasonal, and pointed out that volume was increasing as retailers stocked up for the fall.

Sanger attributed the decline at Big G cereal to price increases earlier this year by General Mills and other cereal makers. He said the company expects volume to increase in the second quarter.

Sanger said the company's 70 new products during the quarter were due in part to its larger size after adding Pillsbury. He also said that new products were the way the company will continue to grow.

The introduction of 70 products represents "kind of a new benchmark that we're going to have to hit going forward. This is a level of innovation that is pretty much built into the expectations of growth that we have," he said.

Sanger said the results put the company on track to meet its expectations for earnings of $2.85 to $2.90 per share for the full year. The target includes the costs of Pillsbury restructuring and other merger-related costs of about 10 to 15 cents per share, the company said. Analysts had been expecting earnings of $3.01 a share excluding charges.

Sanger said he expects growth in the U.S. retail businesses to continue to offset weakness in bakeries and foodservice.

In trading on the New York Stock Exchange, General Mills shares were up 63 cents to close at $47.73.