General Mills Financial Analysis
General Mills - Generating Balanced Growth
From ready-to-eat cereal to convenient meals to wholesome snacks, General Mills is one of the biggest food products manufacturers and competes in growing food categories that are on-trend with consumer tastes around the world. The company markets many well-known brands, such as Haagen Daazs, Yoplait, Betty Crocker, Totinos, and Cheerios, among others. Main rivals include Kellogg, Kraft, Conagra Foods, and Sara Lee. General Mills sells its products in three segments: U.S. retail (63% of net sales), International (25% of net sales), and Bakeries and Foodservices (12% of net sales). In addition, General Mills sells cereals and ice cream through its Cereal Partners Worldwide and Haagen Daazs Japan joint ventures. General Mills continues building its presence in developed markets and increasing presence in emerging markets worldwide by investing in established brands while also developing new products. The company’s goal is to generate balanced, long term growth.
Profitable performance through the past years
General Mills has shown a strong profitable performance during the past years.
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The company has achieved during the last 3 years an average RoE of 28% supported by strong efficiency, financial leverage, and a moderate profitability ratio given the nature of the business. This has resulted in a positive trend of the share price that delivered 3 year returns of 44% from 2009.
The upward trend in RoE that peaked in 2011 reaching 30.6% reversed in 2012 that closed with a RoE of 24.5%. The RoE drop of c. 600 bps in 2012 compared to 2011 is explained by a reduction in profitability that was affected by high input-cost inflation primarily in food ingredients and energy that was not fully transferred to customers (370 bps Gross Profit Margin drop). Performance was also affected by restructuring actions (60 bps impact on profitability) taken to improve organizational effectiveness to drive future growth.
General Mills
From ready-to-eat cereal to convenient meals to wholesome snacks, General Mills is one of the biggest food products manufacturers and competes in growing food categories that are on-trend with consumer tastes around the world. The company markets many well-known brands, such as Haagen Daazs, Yoplait, Betty Crocker, Totinos, and Cheerios, among others. Main rivals include Kellogg, Kraft, Conagra Foods, and Sara Lee. General Mills sells its products in three segments: U.S. retail (63% of net sales), International (25% of net sales), and Bakeries and Foodservices (12% of net sales). In addition, General Mills sells cereals and ice cream through its Cereal Partners Worldwide and Haagen Daazs Japan joint ventures. General Mills continues building its presence in developed markets and increasing presence in emerging markets worldwide by investing in established brands while also developing new products. The company’s goal is to generate balanced, long term growth.
Profitable performance through the past years
General Mills has shown a strong profitable performance during the past years.
[pic]
The company has achieved during the last 3 years an average RoE of 28% supported by strong efficiency, financial leverage, and a moderate profitability ratio given the nature of the business. This has resulted in a positive trend of the share price that delivered 3 year returns of 44% from 2009.
The upward trend in RoE that peaked in 2011 reaching 30.6% reversed in 2012 that closed with a RoE of 24.5%. The RoE drop of c. 600 bps in 2012 compared to 2011 is explained by a reduction in profitability that was affected by high input-cost inflation primarily in food ingredients and energy that was not fully transferred to customers (370 bps Gross Profit Margin drop). Performance was also affected by restructuring actions (60 bps impact on profitability) taken to improve organizational effectiveness to drive future growth.
General Mills