General Mills 2nd-quarter profit climbs partly on improved sales of cereals, snacks

General Mills 2Q profit rises on strong sales

MILWAUKEE — Cash-strapped consumers looking for cheap meals helped push cereal maker General Mills Inc.’s fiscal second-quarter profit 50 percent higher.

The maker of Cheerios and Yoplait yogurt also boosted its full-year earnings guidance for the second time in three months following the strong quarter.

General Mills has posted several strong quarters as ingredient prices dropped and recession-weary consumers eat at home more often to save money.

“Consumers around the world continue to focus on nutritious, convenient food choices that help them make breakfast, lunch and dinner for their families at good value. Demand for our leading brands remains strong,” Chairman and CEO Ken Powell said in a statement Thursday.

General Mills, based in Minneapolis, reported that its earnings climbed to $565.5 million, or $1.66 per share, for the quarter that ended Nov. 29.

Excluding mark-to-market gains on some assets, profit was $1.54 per share.

Sales increased 2 percent to $4.08 billion, partly on better cereal and snacks sales. The company also makes brands like Green Giant, Old El Paso, Progresso and Hamburger Helper.

The results surpassed the expectations of analysts polled by Thomson Reuters, as they forecast a profit of $1.45 per share on sales of $4.07 billion. These estimates usually exclude one-time items.

Shares set a new 52-week high in the session of $69.93. The stock was up 47 cents to $68.76 in late morning trading Thursday.

General Mills continued to draw shoppers to its brand name basics during the quarter, particularly its cereals. Big G cereal revenue climbed 10 percent, with better sales of Chex cereal varieties, Cheerios and Fiber One cereals. The company said its introduction of Banana Nut Cheerios was the most successful cereal launch of 2009.

Snacks sales rose 6 percent on improved results from Fiber One and Nature Valley snack bars as well as several fruit snack varieties.

General Mills also posted sales increases in its baking products, Yoplait and Pillsbury units. In food service and bakeries, a division that includes sales to hotels and restaurants, sales dropped 16 percent, partly on the absence of product lines the company shed, but operating profit grew 32 percent on lower costs.

Consumers are eating more at home in the recession, which helps food makers like General Mills. But the shift away from restaurant eating hurts those business units.

The company boosted its ad spending by 37 percent during the quarter as it tries to keep shoppers aware of its products during difficult economic times. It plans to put more money into advertising during the second half of the year to try to build on its brands’ gains, Powell said. It also plans new products like chocolate Cheerios and Greek-style Yoplait yogurt.

The food maker, which lifted its quarterly dividend on Monday, raised its fiscal 2010 adjusted profit outlook to a range of $4.52 to $4.57 per share. Its previous forecast for adjusted earnings of $4.40 to $4.45 per share had been announced in September and was an increase from a prior guidance of $4.20 to $4.25 per share.

Analysts predict a profit of $4.52 per share for the year.

Standard & Poor’s analyst Tom Graves raised his earnings per share estimate by 6 cents to $4.60, saying sales will benefit from the increased marketing investment.

AP Business Writer Michelle Chapman contributed to this report from New York.