General Mills Profit Dips Amid Taxes, Charges

General Mills Inc. (GIS), the nation's second-largest cereal producer and largest maker of branded yogurt, said Tuesday that third-quarter earnings dropped from a year ago due to taxes related to the sale of its stake in a European snacks business as well as accounting changes.

Net income fell to $230 million, or 58 cents per share, for the three months ended Feb. 27 from $242 million, or 60 cents per share, a year ago. Excluding charges, certain taxes and an accounting change, the company earned 74 cents per share in the latest quarter, up from 64 cents in the 2004 period.

Analysts surveyed by Thomson First Call were looking for the company to post lower operating earnings of 70 cents per share on sales of $2.82 billion in the latest quarter.

Sales grew 3 percent to $2.77 billion from $2.70 billion last year, and worldwide unit volume increased 2 percent. Sales for General Mills' domestic retail operations were flat at $1.93 billion for the quarter, as 1 percent unit volume growth and contributions from pricing and mix were offset by higher promotional expense in the period.

The company said Yoplait yogurt made the strongest contribution to domestic retail unit volume growth, with an 18 percent overall increase led by Yoplait Light (search) and Go-gurt (search). Meals volume grew 5 percent, with strong growth by Progresso soup and Helper dinner mixes. Snacks unit volume rose 7 percent, driven by the introduction of new products, including Nature Valley Sweet & Salty Nut Granola Bars.

General Mills said however, that unit volumes for several other businesses declined as the company worked to raise non-promoted and merchandised price points. Pillsbury USA (search) unit volume fell 4 percent, as growth by Totino's pizza and hot snacks was offset by volume declines in refrigerated baked goods.

In June 2004, General Mills said it targeted fiscal 2005 operating earnings of $2.85 to $2.95 per share, which excludes about 15 cents of charges and one-time items, but doesn't take into account recent business dispositions or accounting changes.

Analysts are predicting full-year operating earnings of $2.92 per share.

Chairman and Chief Executive Officer Steve Sanger said, "Exactly where we finish the year will depend on the extent of our progress in better balancing net price realization and unit volumes in our U.S. retail business. We also need to see another quarter of good profit stability from our Bakeries and Foodservice segment."

General Mills noted that the fourth quarter will include 13 weeks this year compared with 14 weeks last year.