General Mills Sees Higher Costs Down the Road

RetailFOXBusiness

General Mills (NYSE:GIS) reported on Wednesday a better-than-expected 18% improvement in third-quarter profit, helped by tighter expenses and climbing demand for its Nature Valley and Fiber One brands, though the company warned that rising inflation could push prices higher next year.

The Minneapolis-based company posted net earnings of $392 million, or 59 cents a share, compared with $332.5 million, or 48 cents a share, in the same quarter last year, ahead of average analyst estimates polled by Thomson Reuters of 56 cents.

Continue Reading Below

Revenue for the maker of branded consumer foods, from Cheerios to Progresso soup, was $3.65 billion, up 2% from $3.59 million a year ago, narrowly missing the Street’s view of $3.69 billion.

“Results for the third quarter showed an acceleration in sales and profit growth following first-half performance that tracked generally in-line with strong prior-year levels,” General Mills CEO Ken Powell said in a statement.

While the company’s domestic retail segment declined 1% to $2.51 billion, tighter expenses helped the company achieve a 10% increase in operating profit. Sales in the company snacks division climbed 14%, partially offset by a 6% decline in Big G cereals.

Sales in its international business ticked 8% higher to $688 million, led by widening demand in its Asia/Pacific and European markets.

The company, which reaffirmed its fiscal 2011 guidance in the range of $2.46 to $2.48 a share, expects to book its highest earnings growth of the year next quarter, helped by improved pricing that has offset some cost increases brought about by inflation.

Despite its efforts, though, inflation is expected to lift  prices more than 4% to 5% in 2012.