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• Net sales climbed by 6% to $5.0 billion, including a 1% gain due to favorable currency exchange rates
• In 2022, organic net sales are now forecast to rise 4 to 5 percent
General Mills Inc. stock dipped 5.4 percent in premarket trade Tuesday after the food giant announced fiscal second-quarter results that fell short of estimates.
Prolonged supply chain delays and a truck driver shortage in the United States have led packaged food manufacturers to pay greater expenses, adding to soaring prices of components such as wheat, corn, and edible oils, which have already compressed margins throughout the industry, Reuters reported.
“We continued to compete effectively and execute well this quarter in a challenging operating environment,” said Chairman and Chief Executive Officer Jeff Harmening, in a statement.
“In the face of an unprecedented combination of input cost inflation and supply chain disruptions, we’re moving quickly to keep our trusted brands on store shelves for consumers while driving net price realization to protect our bottom line.”
Second Quarter Summary
Net sales climbed by 6% to $5.0 billion, including a 1% gain due to favorable currency exchange rates. Organic net sales climbed by 5%, representing a 5-point rise in organic net price realization and mix.
Gross margin fell 400 basis points to 32.5 percent of net sales, owing to higher input costs and negative mark-to-market impacts, which were mitigated in part by positive net price realization and mix.
Operating profit fell 13% to $800 million, while constant-currency adjusted operating profit fell 6%, indicating considerable input cost inflation and increased costs due to supply chain interruptions.
Diluted profits per share (EPS) was $0.97, a 13% decrease from the previous year; adjusted diluted EPS of $0.99, a 7% decrease in constant currency.
Fiscal 2022 Forecast
Organic net sales are now forecast to rise 4 to 5 percent as a result of better-than-expected results in the first and second quarters, as well as increased Strategic Revenue.
For the full year, the company now expects the cost of goods sold headwinds to be approximately $500 million higher than what was assumed in its initial fiscal 2022 outlook, owing to higher input cost inflation.
The conversion of free cash flow is planned to be at least 95% of adjusted after-tax profits. While the net impact of divestitures, acquisitions, and foreign currency exchange is estimated to diminish reported net sales growth by around 1% for the entire year.
Picture Credits: Food Business News