General Mills Inc. (NYSE:GIS) reported a mixed performance for the second quarter of fiscal 2024, surpassing earnings estimates but falling short of revenue expectations. While the company witnessed a 14% year-over-year increase in adjusted earnings per share at $1.25, beating the Zacks Consensus Estimate of $1.15, net sales of $5,139.4 million fell 2% below the anticipated $5,337.2 million. The decrease in the top line was attributed to a decline in pound volume, partially offset by positive net price realization and mix, resulting in a 2% dip in organic net sales.
The adjusted gross margin expanded by 180 basis points to 35%, driven by cost savings and positive net price realization and mix, offset by input cost inflation and increased supply chain costs. Adjusted operating profit reached $989 million, marking a 13% increase at constant currency rates, with the operating profit margin expanding by 240 basis points to 19.3%.
Segmental Performance
- North America Retail: Revenues in this segment totaled $3,305 million, down 2% year over year due to reduced pound volume. Despite this, the operating profit increased by 3% to $859.9 million.
- International: The segment reported revenues of $683.1 million, up 2% year over year, attributed to positive net price realization and mix. The operating profit surged 94% to $34.6 million.
- Pet: Revenues for the Pet segment were $569.3 million, reflecting a 4% decline year over year, primarily due to reduced pound volume. However, the operating profit increased by 18% to $102.5 million.
- North America Foodservice: Revenues remained flat at $582 million year over year, with the operating profit rising by 17% to $95.5 million.
Other Financial Aspects
General Mills concluded the quarter with $593.8 million in cash and cash equivalents, long-term debt of $10,530.5 million, and total shareholders’ equity of $9,378.8 million. In the first six months of the fiscal year, the company generated $1,495.8 million in cash from operating activities, with capital investments totaling $294 million.
The company paid out dividends amounting to $691 million and repurchased nearly 18.8 million shares for $1.3 billion during the same period.
Fiscal 2024 Guidance Adjustments
Management adjusted its fiscal 2024 outlook, citing the impact of slower volume recovery and factors such as consumers’ economic status, moderating cost inflation, and stabilizing supply-chain conditions. The updated guidance includes expectations of nearly 5% input cost inflation and 5% Holistic Margin Management (HMM) cost savings.
For fiscal 2024, organic net sales are now anticipated to be down 1% to flat year over year, compared to the previous expectation of a 3-4% increase. Adjusted operating profit growth at constant currency rates is projected at 4-5%, with adjusted EPS growth. The company also expects free cash flow conversion of at least 95% of adjusted after-tax earnings, reflecting the revised outlook with lower organic sales growth.
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