General Mills third quarter sales rise 8% with strong contributions from Blue Buffalo

USA – The multinational consumer goods company, General Mills has reported 8% increase in net sales to US$4.2 billion in the third quarter, including contributions from Blue Buffalo Pet Products which it acquired in 2018.

The period ended February 24, 2019 saw operating profit increase 14% while diluted earnings per share (EPS) of $0.74 declined 54% from the year-ago period that included benefits from U.S. tax reform.

Growth in sales was primarily driven by addition of Blue Buffalo, even though positive net price realization and mix were partially offset by lower contributions from volume.

Organic net sales growth in the Asia & Latin America, North America Retail, and Convenience Stores & Foodservice segments was partially offset by a decline in Europe & Australia.

During the third quarter, the company’s margin increased 200 basis points to 34.4% of net sales, driven by cost savings, benefits from net price realization and mix, and the addition of Blue Buffalo, partially offset by higher input costs.

“We had a strong third quarter, with positive organic sales growth and significant operating margin expansion,” said General Mills Chairman and Chief Executive Officer Jeff Harmening.  

“Our year-to-date performance and fourth-quarter plans give us confidence that we will meet or exceed all of our key fiscal 2019 targets. 

For the full year, we now expect adjusted diluted EPS and free cash flow conversion will exceed our initial targets, net sales will finish toward the lower end of our guidance range and adjusted operating profit will finish toward the higher end of the range. 

Our improved execution and strengthened performance this year reinforce our view that a balanced approach to top and bottom-line growth, centered on our Consumer First strategy, will drive long-term value for our shareholders.”

The results include a loss recorded from the sale of its La Salteña fresh pasta and refrigerated dough business in Argentina to Molinos Rio de la Plata.

Net earnings totalled US$447 million from US$941 million, primarily reflecting benefits from the Tax Cuts and Jobs Act (TCJA) in last year’s third quarter.

Growth in the U.S. Cereal and U.S. Meals & Baking operating units was offset by declines in Canada, U.S. Snacks, and U.S. Yogurt.

Through nine months, North America Retail segment net sales were down 2% to US$7.58 billion.

In the Convenience Stores & Foodservice Segment, net sales increased 3% to US$472 million driven by growth in frozen meals, snacks, frozen baked goods, and yogurt, partially offset by declines on bakery flour. 

Third-quarter net sales for the Europe & Australia segment declined 8% to US$433 million, primarily driven by unfavorable foreign currency exchange.  

The company said sales declines for Yoplait yogurt and the negative impact of a continued challenging retail environment in France were partially offset by continued double-digit growth on snack bars and Häagen-Dazs ice cream.

Third-quarter net sales for the Pet segment totalled US$347 million with growth in Food, Drug, and Mass (FDM) and E-commerce channels partially offset by declines in the Pet Specialty channel. 

For Cereal Partners Worldwide, its joint venture with Nestle, net sales increased 2% offset by restructuring charges as well as lower net sales and higher input costs.

The company has raised its full-year fiscal 2019 guidance, expecting Blue Buffalo’s net sales and segment operating profit to grow significantly.