Multinational food processing company General Mills revenue dropped in Q4 2014 to $4.28 billion compared to $4.41 billion in Q4 2013. Thanks to a reduction in costs, the company managed to post a higher profit of $404.6 million. Its quarterly adjusted diluted earnings per share (EPS) were $0.67 in Q4 2014 versus $0.54 in the previous year.
For the whole year, General Mills registered revenues of $17.91 billion (EPS $2.82) versus $17.77 billion (EPS $2.72) one year ago. In pre-market trading today, General Mills shares were 4.2% down.
General Mills Chairman and Chief Executive Officer Ken Powell said:
“Our plans for 2014 called for sales and earnings growth consistent with our long-term business model, along with increased cash returns to shareholders. We made good progress building our worldwide food businesses, and we returned more than $2.7 billion in cash to shareholders through a 17 percent dividend increase and significant share repurchase activity.”
“But our sales and operating profit results were disappointing. In the fourth quarter, promotional spending in developed markets was less effective than we planned and input cost inflation was a bit above our forecast. Net sales and adjusted gross margin fell short of our targets.”
General Mills says it is looking to accelerate topline growth in its 2015 fiscal year outlook by introducing new products and reducing supply-chain costs by $400 million to make up for the estimated cost inflation of 3%.
The maker of Cheerios cereal, Yoplait yoghurt, Häagen-Dazs ice cream and Betty Crocker cake mixes has launched a formal review of its manufacturing and distribution network in North America. It aims to streamline operations and identify potential capacity reductions, which most likely means laying off workers and shutting down plants.
A changing market
The measures come as the company struggles to respond to a changing market – in the US people are spoiled for choice when deciding on what to eat in the morning. Its cereal and yogurt units have seen slumping sales. Both General Mills and arch-rival Kellogg have been desperately trying to find new ways of making cereals more appealing. General Mills has added protein to its Cheerios.
Other food companies are reporting slumping sales throughout grocery stores. ConAgre, Campbell Soup, Heinz and Mondelez International have all made moves to improve efficiency by:
- closing factories,
- laying off workers,
- getting rid of under-performing brands,
- switching from first-class to coach travel for their executives.
General Mills was slow off the mark regarding the Greek yogurt craze. It has introduced Greek options in its Yoplait offerings, but market share is still way behind companies like Chobani.
In a press release, General Mills says it will announce what actions it will take in a few months.
The Minneapolis-based company forecasts net sales to increase at a “mid-single digit rate” and EPS at a “high single-digit” rate in 2015. Earnings in 2015 will be three cents per share down due to the effects of currency fluctuations.
On a conference call with analysts today, on being asked how General Mills plans to halt the negative sales trend, Mr. Powell said “I wish there was one silver bullet.”
Healthy foods up, traditional produce down
Mr. Powell added:
“Consumers’ definitions of health and well being are changing and we need to be very attuned to that. We are in changing times. We are a marketing company and our job is to understand the change and capitalize on it.”
General Mills has done well in gluten-free foods and healthier snacks.
Sales in its US snacks business, including Fiber One and Nature Valley bars, rose 6% ($1.8 billion) compared to the previous year.
Sales of baking products, yogurts, ready meals and frozen produce, on the other hand, declined. US cereals, General Mills’ biggest source of revenue, registered sales of $2.4 billion, virtually the same as in the previous year.
Foreign sales in 2014, at $1.3 billion, were 7% less than in 2013.