General Mills' 2012 outlook misses Street view
General Mills Inc
The maker of Cheerios cereal and Progresso soups said on Wednesday that it expects costs to rise 10 percent to 11 percent in the 2012 fiscal year, which began May 30. That is more than double the inflation it had forecast for the previous year.
The inflation will be the most intense in the first quarter. As a result, General Mills expects quarterly profit to fall in the current quarter and rise in the remaining three.
General Mills shares were up 0.7 percent in late morning trade on Wednesday, in line with the Standard & Poor's Packaged Food index <.GSPFOOD> and the S&P 500 <.SPX>.
I try to look at this as the glass being half-full, said Edward Jones analyst Jack Russo, highlighting the fact that the most pressure is concentrated in the first quarter. Hopefully as they raise prices to offset some of this pressure, it won't affect demand too too much.
General Mills raised prices earlier this year to offset soaring costs for ingredients such as corn, wheat and dairy products.
The company forecast fiscal 2012 earnings per share of $2.60 to $2.62 excluding special items, up from $2.48 in fiscal 2011. Analysts on average were expecting $2.67, according to Thomson Reuters I/B/E/S.
We believe the operating environment in many developed markets will remain challenging over the next 12 months, General Mills Chief Executive Ken Powell said in a statement.
The company's full-year plan assumes volume will be lower, with mid-single-digit sales growth driven by price increases, new products and marketing initiatives, he said.
For the fourth quarter, General Mills reported net income of $320.2 million, or 48 cents per share, up from $211.9 million, or 31 cents per share, a year earlier.
Excluding one-time items, profit was 52 cents per share, matching the average analyst estimate. Sales rose to $3.63 billion from $3.53 billion. Analysts were expecting $3.67 billion.
Volume fell 4 percent because of fewer discounts compared with the period a year earlier. Price increases and selling a greater proportion of higher-priced items added 6 percentage points of sales growth, while foreign exchange rates added 1 percentage point.
In the U.S. retail segment, sales fell 2 percent as the benefit of price increases was offset by a 6 percent decline in volume. Internationally, sales rose 16 percent.
General Mills shares were up 31 cents at $37.52 on the New York Stock Exchange on Tuesday.
(Reporting by Martinne Geller; Editing by Lisa Von Ahn, Dave Zimmerman, John Wallace and Robert MacMillan)
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