BUSINESS
09/21/2011 07:38 EDT | Updated 11/21/2011 05:12 EST

General Mills profit falls, but adjusted results top Wall Street's estimate; revenue up

MINNEAPOLIS - General Mills Inc.'s fiscal first-quarter net income fell 14 per cent, but its adjusted results beat Wall Street's expectations as revenue climbed on higher prices, solid demand and new products.

The Minneapolis-based food maker also reaffirmed its full-year adjusted earnings outlook.

The maker of Cheerios cereal and Haagen-Dazs ice cream said Wednesday that its net income fell to $405.6 million, or 61 cents per share, for the period ended Aug. 28, down from $473.6 million, or 70 cents per share, a year earlier.

Removing special items, adjusted earnings came to 64 cents per share.

This topped the 62 cents per share that analysts surveyed by FactSet predicted.

Revenue rose 9 per cent to $3.85 billion from $3.53 billion, beating Wall Street's forecast of $3.81 billion.

The period included one month of results for Yoplait, which the company acquired a controlling stake in during the quarter.

General Mills announced in May that it would pay $1.15 billion to acquire a controlling interest in the yogurt company from a French investment firm and dairy group.

General Mills said the Yoplait deal added 3 percentage points to its revenue increase.

Aside from Yoplait, Chairman and CEO Ken Powell said in a statement that increased prices, resilient consumer demand for existing products and a good early response to new products that debuted in the quarter all contributed to its revenue performance.

Revenue for the company's U.S. retail division increased 3 per cent to $2.51 billion.

Cereal sales edged up 1 per cent, helped by brands such as Chex and Cinnamon Toast Crunch. New products included Cinnamon Burst Cheerios, Cocoa Puffs Brownie Crunch and Fiber One 80 calorie cereal also added to results.

At the snacks unit, sales rose 17 per cent, driven by Nature Valley and Fiber One snack bars. Sales for the baking products division increased 5 per cent, while Pillsbury segment sales gained 4 per cent.

The Small Planet Foods division reported a 13 per cent sales increase, helped by Cascadian Farm cereal and Larabar.

Results were disappointing for the meals unit, which posted a 4 per cent sales decline due to lower shipment volumes for dinner mixes, canned vegetables and soup. Yoplait sales fell 3 per cent.

General Mills' overseas performance was strong, with revenue up 30 per cent to $856 million. The results were propelled by strength in Europe, which reported a 36 per cent gains. This was followed by a 15 per cent gain for the Asia/Pacific region and a 12 per cent increase for Latin America. Canada posted an 8 per cent increase.

Bakeries and foodservice segment revenue rose 13 per cent to $481 million, with sales to bakeries and national restaurants up 18 per cent.

Powell predicts General Mills' earnings will rise over the next nine months. The company maintains that hits fiscal 2012 adjusted earnings will come in between $2.59 and $2.61 per share.

Analysts expect earnings of $2.61 per share for the year.