CHICAGO – General Mills Inc. (GSI) on Wednesday said quarterly earnings rose 24 percent, as an additional week of sales offset higher ingredient costs and weakness from the popularity of low-carbohydrate diets.
The maker of Progresso soups (search) and Wheaties cereal (search) trimmed its profit growth outlook through fiscal 2006, warning that earnings in the next fiscal year would be hurt by the rising costs of energy, fats, oils, dairy and other commodities, as well as increases in health care and restricted stock expenses.
"To offset those headwinds, our plan includes stronger levels of product innovation, companywide productivity and cost-savings initiatives, and selected price increases that are necessary due to the increases in our input costs," said Chairman and Chief Executive Steve Sanger in a statement.
The Minneapolis-based company, which earlier this month raised wholesale prices in several food categories to help offset rising costs, also raised its quarterly dividend by 13 percent.
General Mills said it earned $278 million, or 72 cents a share, in the fiscal fourth quarter, compared with $225 million, or 59 cents share, a year earlier.
The latest quarter had 14 weeks, compared with 13 weeks in the year-earlier period.
Before restructuring costs, earnings were 74 cents a share, compared with 64 cents in the year-ago quarter. General Mills was expected to earn 72 cents before special items, according to Reuters Estimates.
Net sales rose 10 percent to $2.79 billion, as strength in areas such as cereal and yogurt offset weakness in refrigerated doughs, which were hurt by the popularity of low-carb diets such as Atkins.
Compound earnings per share growth in the three-year period ending in fiscal 2006 period is now seen in the "high single digit" range, down from a prior 11-percent forecast. Sales growth during the same period is projected at 3 percent to 4 percent, down from 5 percent to 6 percent.
General Mills expects fiscal year 2005 earnings of $2.75 to $2.80 a share, after restructuring and cost-cutting steps that are expected to reduce profit by 10 cents to 15 cents a share.
Commodity costs in the year are expected to be up $165 million from fiscal 2004.
The company raised its quarterly dividend to 31 cents