MINNEAPOLIS — General Mills, Inc.’s operating performance during fiscal 2015 was mixed, as restructuring, impairment and other exit costs weighed on results during the year. The company also faced challenges in its largest operating segment — U.S. Retail.
Net income in the year ended May 31 was $1,221.3 million, equal to $2.02 per share on the common stock, down 33% from $1,824.4 million, or $2.90 per share, in fiscal 2014. Operating profit fell nearly 30% to $2,077.3 million from $2,957.4 million.
Restructuring, impairment and other exit costs totaled $544 million in 2015 compared with $4 million in 2014. An additional $60 million of restructuring and $13 million of project-related charges were recorded in cost of sales, General Mills said.
Net sales also were lower year-over-year, falling 1.6% to $17,630.3 million from $17,909.6 million. General Mills said pound volume reduced net sales growth by 1 percentage point. Net price realization and mix contributed 2 percentage points of net sales growth, which was offset by a 3-point reduction in net sales growth from foreign currency exchange effects.
“General Mills fiscal 2015 operating performance was mixed,” said Ken Powell, chairman and chief executive officer. “Our Convenience Stores and Foodservice segment recorded good sales growth, increased its operating profit margin and delivered record profit results. Our International segment also achieved good margin expansion and profit growth in constant currency. However, sales and profit declined for U.S. Retail — our largest operating segment. We returned our U.S. yogurt business to growth, and our brands gained share in categories representing 65% of our U.S. Retail measured sales volume, but overall sales trends reflected the impact of changing consumer food preferences.”
In the U.S. Retail segment, operating profit totaled $2,159.3 million, down nearly 7% from $2,311.5 million in fiscal 2014. Sales in the segment eased 0.9% to $10,507 million from $10,604.9 million a year ago. General Mills said Annie’s contributed 1 percentage point of net sales growth and 1 point of pound volume growth during the year.
“Our U.S. Retail segment had a disappointing year, but trends did improve in the second half, most notably for yogurt and cereal,” Don Mulligan, executive vice-president and chief financial officer, said during a July 1 conference call with analysts. “Our U.S. Retail brands gained share in categories representing 65% of measured sales volume, including gains in the cereal, yogurt and grain snacks categories. But overall sales trends in many categories were weak, reflecting the impact of changing consumer food preferences.”
General Mills said cash provided by operating activities totaled $2.5 billion in fiscal 2015, basically on par with fiscal 2014. Capital investments totaled $712 million, which included investments to launch gluten-free Cheerios in the United States and Yoplait in China in fiscal 2016.
On June 25, General Mills announced Project Compass, a new initiative designed to enable the company’s International segment to accelerate long-term growth through increased organizational effectiveness and reduced administrative expense. The company said it expects the initiative to generate $25 million to $30 million in savings in fiscal 2016, and annual savings of $45 million to $50 million by fiscal 2017. General Mills now expects the combination of Project Compass and the cost-reduction projects initiated in fiscal 2015 to generate cost savings of $285 million to $310 million in fiscal 2016 and more than $400 million by fiscal 2017.
“Where we had consumer-focused news and innovation on our brands in fiscal 2015, we generated growth,” Mr. Powell said. “We expect to expand the impact of our Consumer First strategic focus across our worldwide operations in fiscal 2016 to generate sustainable topline growth. Our plans include a strong line-up of core brand renovation and new product innovation. We will have six months of incremental contribution from the Annie’s business, and we will drive significant productivity from our ongoing Holistic Margin Management (HMM) program and our new cost-savings initiatives.”
