General Mills 3Q profit falls on higher costs

MINNEAPOLIS (AP) âÄî General Mills Inc. said Wednesday that its profit dropped 33 percent in the fiscal third quarter on higher input costs and a stronger dollar as sales increased on the strength of some of its well-known brands. The food company, which makes Yoplait Yogurt, Wheaties cereal and Pillsbury Toaster Strudel, also lifted its 2009 adjusted profit forecast on increased marketing efforts. For the period ended Feb. 22, earnings fell to $288.9 million, or 85 cents per share, compared with $430.1 million, or $1.23 per share, a year ago. Excluding an insurance settlement, the reversal of a tax benefit and other items, earnings were 79 cents per share compared with 87 cents in the prior-year period. Analysts surveyed by Thomson Reuters, whose estimates generally exclude one-time items, forecast profit of 88 cents per share. “Our results this quarter reflect a difficult comparison against strong prior-year results, as well as significantly higher input costs in the current period,” Chief Executive Ken Powell said in a statement. Third-quarter sales rose 4 percent to $3.54 billion to meet analysts’ estimates, but the stronger dollar reduced revenue growth by 3 percentage points, according to the Golden Valley, Minn.-based company. Although the stronger dollar took a bite out of sales growth, General Mills and other food businesses continue to benefit during the recession as cash-strapped consumers eat more meals at home to save money. Sales of General Mills products including Honey Nut Cheerios, Betty Crocker dessert mixes and Green Giant frozen vegetables improved during the third quarter, while revenue for the snacks division slipped 4 percent without contributions from the Pop Secret microwave popcorn business, which was sold in the second quarter. Revenue for the company’s consolidated international operations fell 5 percent due to the stronger dollar. General Mills raised its fiscal 2009 adjusted earnings outlook to a range of $3.87 to $3.89 per share from a range of $3.83 to $3.87 per share. But the increased range is still below Wall Street’s expectations for full-year net income of $3.94 per share. The company boosted its marketing efforts during the quarter, with consumer marketing expense up 6 percent. “We intend to continue investing substantial levels of consumer marketing support behind our brands in order to help position our businesses for continuing growth in fiscal 2010,” Powell said.