General Mills cuts profit forecast as freight, commodity costs weigh

A box of Cheerios breakfast cereal made by General Mills is shown in this illustration photograph taken in Encinitas, California, U.S. June 27, 2016. REUTERS/Mike Blake/File Photo

(Reuters) - Cheerios cereal maker General Mills Inc cut its yearly earnings forecast, citing a sharp increase in freight and commodity costs, driving its shares down 6 percent in premarket trading on Wednesday.

Continue Reading Below

General Mills, like other U.S. packaged food companies, has been facing higher transportation costs as railroads and truck fleets have raised prices amid a shortage of drivers, reduced capacity, higher fuel prices and a strengthening U.S. economy.

"Like the broader industry, we're seeing sharp increases in input costs, including inflation in freight and commodities," General Mills Chief Executive Jeff Harmening said in a statement.

Minneapolis-based General Mills, the maker of Yoplait yogurt and Nature valley granola bars, now expects fiscal 2018 adjusted earnings per share to grow up to 1 percent, compared with a prior forecast for a 3 to 4 percent increase.

Net income attributable to General Mills more than doubled to $941.4 million in the third quarter ended Feb. 25, helped by a one-time tax benefit of $504 million from changes in the U.S. tax code.

Excluding one-time items, the company earned 79 cents per share.

Net sales rose 2.3 percent to $3.88 billion.

Analysts had expected third-quarter earnings of 78 cents per share and revenue of $3.78 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Uday Sampath in Bengaluru; Editing by Sai Sachin Ravikumar)