General Mills 2Q net income rises on cost-cutting

SARAH SKIDMORE - AP Food Industry Writer
December 16, 2010
In this Dec. 12, 2010 photo,General Mills yogurt, Yoplait is displayed at a grocery store in Palo Alto, Calif. General Mills Inc. said Thursday, Dec. 16, cost cutting offset higher commodity costs and tough competition in the second-quarter, but adjusted results fell short of expectations. (AP Photo)

General Mills Inc. sold more cereal and snacks in its second quarter, but higher commodity costs and lower selling prices left its adjusted earnings short of expectations.

The maker of Cheerios, Yoplait and Cinnamon Toast Crunch reported Thursday that its net income rose 9 percent to $613.9 million, or 92 cents per share. That compares with $565.5 million, or 83 cents per share, last year. Adjusting for a tax benefit and the effects of mark-to-mark accounting, net income was 76 cents per share, missing analyst expectations of 78 cents per share, according to a poll by Thomson Reuters.

Revenue edged up nearly 1 percent to $4.07 billion. Analysts expected $4.1 billion.

General Mills, based in Minneapolis, has benefited during the down economy as more Americans began eating at home more often. However, heavy promotions by retailers and food makers meant lower prices for the food company.

Higher costs for ingredients such as grain have also posed a problem. And the company's earnings suffered from a tough comparison to a strong performance in the first half of last year.

The food maker warned investors in November that it expected the quarter's results to be largely in line with, but not above, last year's results. That held true: General Mills' U.S. retail revenue was flat at $2.85 billion while international revenue rose 4 percent to $749 million. But the company expects its sales and earnings growth to pick up in the second half of the year.

General Mills said price increases for several product categories, such as flour, frozen vegetables and others, will take effect in January. The company's leaders said they expect that they and other competitors to back off the intense promotions and price-cutting to maintain profit margins.

The company said it expects long-term international growth as more people around the globe eat more cereal. And the company said it plans to continue tight cost controls.

General Mills said it expects to reach its full-year guidance of $2.46 to $2.48 per share. Analysts expect $2.48 per share.

Shares of the company rose 16 cents to $36.54 in afternoon trading.


AP Retail Writer Mae Anderson contributed to this report from New York.