General Mills has posted a net sales increase of 2.1% in its second-quarter results thanks to a strong performance of its cereal and snack brands such as Cinnamon Toast Crunch and Nature Valley.
Reaching $4.2 billion in the three months to November 2017, the rise marks the company’s first quarterly increase since May 2015.
Operating profit, however, was down 5% to $730 million, which is said to be “due to lower gross margins partially offset by higher net sales”.
The positive results have led General Mills to update its full-year fiscal 2018 targets, with organic net sales expected to be between flat and down 1%, above the previous range of a decline of 1-2%. The updated target represents a 300-400 basis point improvement over fiscal 2017 results.
Earlier in the year, General Mills CEO Jeff Harmening, who has also become company chairman, pledged to “move with urgency in fiscal 2018 to meaningfully improve our net sales”. Following the latest figures, he said he was pleased with the breadth of the top-line improvement across the company’s product platforms and geographies.
“We’re executing better, with stronger innovation, more effective brand building, and better merchandising, leading to market share gains in the majority of our key global platforms,” he said. “I’m also pleased that we delivered top-line growth in absolute terms.
General Mills CEO Jeff Harmening
“At the same time, we still have important work to do to achieve our full-year goals. Our profit was down in the first half, but I’m confident we will deliver profit growth in the second half. With two quarters behind us and good visibility to the impact of our strong second-half plans, we’re raising our 2018 organic sales guidance and maintaining our outlook for profit and EPS.
“I’m encouraged by the step that fiscal 2018 represents in our effort to return our business to consistent top- and bottom-line growth for the long term.”
In the US, yogurt sales were up on the previous quarter thanks to the introduction of Oui by Yoplait and Yoplait Mix-Ins. Meanwhile In the company’s convenience and foodservice sector, net sales were up 5% to $512 million, driven by growth in frozen meals, cereals and snacks.
Finally, second-quarter sales in Europe and Australia were up 7% and in Asia and Latin America up by 2%.
For fiscal 2018, General Mills has now identified four growth priorities: growing cereal globally; improving US yogurt through innovation; investing in differential growth opportunities including Häagen-Dazs ice cream, snack bars, Old El Paso Mexican food, and its portfolio of natural and organic food brands; and managing its foundation brands.
By directing resources toward these global priorities, General Mills said it expects to drive a “significant improvement in its organic net sales trends in fiscal 2018, which represents an important step in returning the business to consistent organic net sales growth”.
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