General Mills 1Q profit edges down on high costs

Wed Sep 17, 2008 7:45 AM EDT

business, earnings, gold-medal, general-mills, multi-grain-cheerios

Cereal maker General Mills on Wednesday said profit fell 4 percent during its fiscal first quarter, as strong sales of products such as Gold Medal flour and Multi-Grain Cheerios failed to offset surging commodity costs.

But revenue topped Wall Street expectations, and the Minneapolis-based cereal maker raised its full-year profit outlook.

Earnings for the quarter ended Aug. 24 fell to $278.5 million, or 79 cents per share, from $288.9 million, or 81 cents per share, in the same quarter last year. Excluding charges on commodity positions, profit would have been 96 cents per share.

Revenue rose 14 percent to $3.5 billion from $3.07 billion.

Analysts polled by Thomson Reuters had predicted profit of 87 cents per share on revenue of $3.28 billion.

"Operating profits showed strong growth despite the input cost pressure and our increased consumer marketing investment," said Chairman and Chief Executive Ken Powell in a statement. Food makers across the board are facing high commodity costs for key ingredients like grain and fuel.

Baking product sales grew 25 percent on gains by Betty Crocker dessert mixes and Gold Medal flour. Yoplait division sales grew 19 percent while snack division sales grew 14 percent, helped by Nature Valley and Fiber One grain snack bars. A 10 percent growth in cereals was spurred by Multi-Grain, Honey Nut and original Cheerios as well as Fiber One.

International sales rose 15 percent to $690 million.

General Mills expects input cost inflation to continue to be 9 percent in fiscal 2009.

The company expects sales during the year to grow in the mid-single-digit rate.

The company now expects adjusted fiscal 2009 earnings of $3.81 to $3.85 per share, up from a prior estimate of $3.78 to $3.83 per share. Analysts forecast profit of $3.84 per share.

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