General Mills Reports Fiscal 2021 Third-Quarter Results

Rhea-AI Summary

General Mills (NYSE: GIS) reported third-quarter results for the period ending February 28, 2021, showing an 8% increase in net sales to $4.5 billion. Organic net sales rose 7%, driven by strong market share gains amid elevated at-home food demand. Net earnings increased 31% to $596 million, with diluted EPS climbing 30% to $0.96. The company announced a proposed divestiture of its European Yoplait operations and resumed share repurchases, indicating a solid balance sheet. General Mills aims to capitalize on ongoing consumer demand shifts with its Accelerate strategy.

Positive

• 8% increase in net sales to $4.5 billion.
• 31% rise in net earnings to $596 million.
• 30% increase in diluted EPS to $0.96.
• Proposed divestiture of European Yoplait to enhance growth profile.
• Resumed share repurchase activity, indicating strong financial position.

Negative

• Adjusted gross margin decreased 90 basis points to 33.0% of net sales due to higher input costs.
• Higher SG&A expenses partially offsetting operating profit gains.

General Mills (NYSE: GIS) today reported results for the third quarter ended February 28, 2021.

“We continued to execute well and delivered profitable growth in the third quarter,” said General Mills Chairman and Chief Executive Officer Jeff Harmening. “We’ve made good progress on our fiscal 2021 priorities, including competing effectively, fueling investment in our brands and capabilities, and reducing our leverage. With our balance sheet in a strong position, we have resumed share repurchase activity in the fourth quarter. We’re continuing to advance our Accelerate strategy, including yesterday’s announcement of our proposed divestiture of our European Yoplait business. Looking ahead, we remain focused on strengthening our momentum and emerging from the pandemic a stronger company, even better positioned to drive long-term shareholder value.”

General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and being a force for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to reshaping its portfolio with strategic acquisitions and divestitures, including the proposed divestiture of its European Yoplait operations, to further enhance its growth profile.

General Mills expects that changes in consumer behaviors driven by the COVID-19 pandemic will result in ongoing elevated consumer demand for food at home, relative to pre-pandemic levels. These changes include more time spent working from home and increased consumer appreciation for cooking and baking. The company plans to capitalize on these opportunities, addressing evolving consumer needs through its leading brands, innovation, and advantaged capabilities to generate profitable growth.

Proposed Divestiture of European Yoplait Operations

General Mills announced yesterday that it entered into a memorandum of understanding to sell its 51 percent controlling interest in its European Yoplait operations to Sodiaal, a leading French dairy cooperative, in exchange for full ownership of the Canadian Yoplait business and a reduced royalty rate for use of the Yoplait and Liberté brands in the United States and Canada. This growth- and margin-accretive transaction advances General Mills’ portfolio reshaping efforts within its Accelerate strategy. The proposed transaction is expected to close by the end of calendar 2021, subject to appropriate labor consultations, regulatory filings, and other customary closing conditions.

Third Quarter Results Summary

• Net sales increased 8 percent to $4.5 billion and organic net sales were up 7 percent, reflecting broad-based market share gains amid elevated at-home food demand resulting from the COVID-19 pandemic.
• Gross margin increased 80 basis points to 34.4 percent of net sales, driven by favorable net price realization and mix and lower mark-to-market expenses, partially offset by higher input costs. Adjusted gross margin decreased 90 basis points to 33.0 percent of net sales, driven by higher input costs, including input cost inflation, costs to secure incremental capacity, and higher logistics costs, partially offset by favorable net price realization and mix.
• Operating profit of $827 million was up 27 percent, primarily driven by higher gross profit dollars and a net gain on investment activity, partially offset by higher selling, general, and administrative (SG&A) expenses. Operating profit margin of 18.3 percent increased 270 basis points. Adjusted operating profit of $716 million increased 5 percent in constant currency, driven by higher constant-currency adjusted gross profit dollars, partially offset by higher SG&A expenses, including higher investment in capabilities and media. Adjusted operating profit margin decreased 30 basis points to 15.8 percent.
• Net earnings attributable to General Mills increased 31 percent to $596 million and diluted EPS increased 30 percent to $0.96, primarily reflecting higher operating profit, partially offset by higher average diluted shares outstanding. Adjusted diluted EPS totaled $0.82, up 6 percent in constant currency, primarily driven by higher adjusted operating profit and lower net interest expense, partially offset by higher average diluted shares outstanding.

Nine Month Results Summary

• Net sales increased 8 percent to $13.6 billion and organic net sales also increased 8 percent, reflecting positive pound volume and favorable net price realization and mix.
• Gross margin increased 120 basis points to 35.8 percent of net sales, driven by favorable net price realization and mix, lower mark-to-market expenses, and lower restructuring charges recorded in cost of sales, partially offset by higher input costs. Adjusted gross margin increased 10 basis points to 34.9 percent of net sales, driven by favorable net price realization and mix, partially offset by higher input costs.
• Operating profit of $2.6 billion increased 22 percent, primarily driven by higher gross profit dollars, partially offset by higher SG&A expenses, including higher media investment. Operating profit margin of 19.1 percent was up 220 basis points. Adjusted operating profit of $2.4 billion increased 11 percent in constant currency, driven by higher constant-currency adjusted gross profit dollars, partially offset by higher SG&A expenses, including higher investment in media and capabilities. Adjusted operating profit margin increased 50 basis points to 17.7 percent.
• Net earnings attributable to General Mills increased 24 percent to $1.9 billion and diluted EPS of $3.10 increased 22 percent, primarily reflecting higher operating profit, higher after-tax earnings from joint ventures, and lower net interest expense, partially offset by a higher effective tax rate and higher average diluted shares outstanding. Adjusted diluted EPS of $2.88 was up 14 percent in constant currency, primarily driven by higher adjusted operating profit, higher after-tax earnings from joint ventures, and lower net interest expense, partially offset by higher average diluted shares outstanding and a higher adjusted effective tax rate.

Operating Segment Results

Note: Tables may not foot due to rounding.

Components of Fiscal 2021 Reported Net Sales Growth
Third Quarter		Volume		Price/Mix		Foreign Exchange			Reported Net Sales
North America Retail		9 pts		--		--			9%
Pet		16 pts		(3) pts		--			14%
Convenience Stores & Foodservice		(7) pts		(3) pts		--			(10)%
Europe & Australia		2 pts		4 pts		9 pts			15%
Asia & Latin America		9 pts		5 pts		(3) pts			12%
Total		5 pts		3 pts		1 pt			8%
Nine Months
North America Retail		12 pts		(1) pt		--			11%
Pet		14 pts		(1) pt		--			13%
Convenience Stores & Foodservice		(9) pts		(3) pts		--			(12)%
Europe & Australia		--		4 pts		6 pts			10%
Asia & Latin America		12 pts		1 pt		(6) pts			8%
Total		5 pts		3 pts		--			8%

Components of Fiscal 2021 Organic Net Sales Growth
Third Quarter		Organic Volume		Organic Price/Mix			Organic Net Sales		Foreign Exchange		Acquisitions & Divestitures			Reported Net Sales
North America Retail		9 pts		--			9%		--		--			9%
Pet		16 pts		(3) pts			14%		--		--			14%
Convenience Stores & Foodservice		(7) pts		(3) pts			(10)%		--		--			(10)%
Europe & Australia		2 pts		4 pts			7%		9 pts		(1) pt			15%
Asia & Latin America

FAQ

What were General Mills' Q3 earnings results for 2021?

In Q3 2021, General Mills reported net sales of $4.5 billion, a 8% increase, and net earnings of $596 million, up 31%.

What is the EPS for General Mills in Q3 2021?

General Mills reported a diluted EPS of $0.96 in Q3 2021, a 30% increase from the previous year.

What strategic moves is General Mills making in 2021?

General Mills is executing its Accelerate strategy, including a proposed divestiture of its European Yoplait business and resuming share repurchases.

How did General Mills' gross margin perform in Q3 2021?

The gross margin for General Mills increased by 80 basis points to 34.4% of net sales, although adjusted gross margin decreased by 90 basis points.

What factors are driving General Mills' growth in 2021?

The growth is attributed to increased at-home food demand due to consumer behavior changes during the COVID-19 pandemic.