General Mills reports fourth-quarter and full-year results for fiscal 2022, provides fiscal 2023 outlook
Source General Mills
General Mills reported results for the fourth quarter and fiscal year ending May 29, 2022.
Full-year highlights
Net sales of $19.0 billion increased 5% from the prior year; organic net sales¹ were up 6%.
Operating profit increased 11% to $3.5 billion; constant-currency adjusted operating profit was up 2%.
Diluted earnings per share (EPS) of $4.42 were up 17%; adjusted diluted EPS of $3.94 increased 4% in constant currency.
Operating cash flow increased 11% to $3.3 billion.
Fourth-quarter highlights
Net sales increased 8% to $4.9 billion; organic net sales increased 13%.
Operating profit increased 85% to $1.0 billion; constant-currency adjusted operating profit increased 21%.
Diluted EPS of $1.35 increased 98%; adjusted diluted EPS of $1.12 were up 23% in constant currency.
“Fiscal 2022 was another successful year for General Mills, marking the fourth consecutive year that we’ve delivered results that met or exceeded our targets for top and bottom-line growth and cash generation,” General Mills Chairman and Chief Executive Officer Jeff Harmening stated in the announcement. “I am proud of the way our team advanced our Accelerate strategy this year by executing well on our core business while taking significant steps to reshape our portfolio. Though significant inflation and supply chain disruptions put pressure on our margins, we responded quickly to address those challenges and keep our brands on shelf for our customers and consumers.
“We plan to build on our strong momentum in fiscal 2023 by continuing to compete effectively, investing in our brands and capabilities, and reshaping our portfolio. Importantly, our board reinforced its confidence in our performance and outlook by approving a six% increase in our dividend, underlining our commitment to driving strong returns for General Mills shareholders over the long term.”
General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and being a force for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to reshaping its portfolio with strategic acquisitions and divestitures, including seven transactions announced or completed in fiscal 2022, to further enhance its growth profile.
Fourth-quarter results summary
Net sales increased 8% to $4.9 billion, including a 4-point net headwind from divestiture and acquisition activity and one point of unfavorable foreign currency exchange. Organic net sales increased 13%. Organic net price realization and mix added 14 points to organic net sales growth, driven by Strategic Revenue Management (SRM) actions put in place in response to significant input cost inflation including a 2-point benefit from index pricing on bakery flour in the North America Foodservice segment. Lower organic pound volume was a 2-point headwind to organic net sales growth.
Gross margin was up 120 basis points to 36.2% of net sales, driven by favorable net price realization and mix and mark-to-market effects, partially offset by higher input costs. Adjusted gross margin was down 70 basis points to 33.8% of net sales, driven by double-digit input cost inflation, higher other cost of goods sold, and supply chain deleverage, partially offset by favorable net price realization and mix and Holistic Margin Management (HMM) cost savings.
Operating profit of $1.0 billion was up 85%, driven primarily by higher gross profit dollars, lower restructuring charges, and divestiture gains, partially offset by unfavorable net investment activity. Operating profit margin of 20.8% was up 870 basis points. Constant-currency adjusted operating profit increased 21%, driven by higher adjusted gross profit dollars and lower adjusted selling, general, and administrative (SG&A) expenses. Adjusted operating profit margin increased 200 basis points to 18.3%.
Net earnings attributable to General Mills were up 97% to $823 million and diluted EPS was up 98% to $1.35, driven primarily by higher operating profit and lower average diluted shares outstanding. Adjusted diluted EPS of $1.12 increased 23% in constant currency, driven primarily by higher adjusted operating profit and lower average diluted shares outstanding.
Full-year results summary
Net sales increased 5% to $19.0 billion, including a 1-point net headwind from divestiture and acquisition activity. Organic net sales increased 6%. Organic net price realization and mix added 7 points to organic net sales growth, driven by SRM actions put in place in response to significant input cost inflation including a 1-point benefit from index pricing on bakery flour in the North America Foodservice segment. Lower organic pound volume was a 1-point headwind to organic net sales growth.
Gross margin was down 190 basis points to 33.7% of net sales, driven by higher input costs, partially offset by favorable net price realization and mix. Adjusted gross margin was down 180 basis points to 33.0% of net sales, driven by 8% annual input cost inflation, higher other cost of goods sold, and supply chain deleverage, partially offset by favorable net price realization and mix and HMM cost savings.
Operating profit of $3.5 billion was up 11%, driven primarily by gains on divestitures and lower restructuring charges, partially offset by unfavorable net investment activity. Operating profit margin of 18.3% was up 100 basis points. Constant-currency adjusted operating profit increased 2%, driven by lower adjusted SG&A expenses. Adjusted operating profit margin decreased 50 basis points to 16.9%.
Net earnings attributable to General Mills were up 16% to $2.7 billion and diluted EPS was up 17% to $4.42, primarily reflecting higher operating profit, a lower effective tax rate, and lower average diluted shares outstanding. Adjusted diluted EPS of $3.94 was up 4% in constant currency, driven primarily by higher adjusted operating profit, lower net interest expense, and lower average diluted shares outstanding, partially offset by lower non-service benefit plan income.
Portfolio reshaping
General Mills took important steps to advance its portfolio reshaping efforts during fiscal 2022, announcing or closing seven transactions that are expected to increase the company’s top- and bottom-line growth profile over the long term. These include the acquisition of the Nudges, True Chews, and Top Chewspet treats brands in North America, which closed in the first quarter of fiscal 2022; the divestiture of yogurt in Europe, which closed in the second quarter of fiscal 2022; a series of divestitures of dough in Europe and Israel, which closed between the third quarter of fiscal 2022 and the first quarter of fiscal 2023; the acquisition of the TNT Crust foodservice pizza crust business in North America, which closed in the first quarter of fiscal 2023; and the prospective divestiture of the Helpermain meals and Suddenly Saladside dishes businesses in North America, which is expected to close in the first quarter of fiscal 2023.
North America retail segment
Fourth-quarter net sales for General Mills’ North America Retail segment increased 11% to $3.0 billion, driven by favorable net price realization and mix, partially offset by lower pound volume. Organic net sales were also up 11%. Net sales were up 18% in U.S. Snacks, up 14% in U.S. Meals & Baking Solutions, up 5% in U.S. Morning Foods, and down 1% in Canada. Segment operating profit of $764 million was up 18% as reported and in constant currency, driven primarily by favorable net price realization and mix, partially offset by higher input costs and lower volume.
For the full year, North America Retail segment net sales increased 3% to $11.6 billion. Net price realization and mix added 9 points to net sales growth, driven by SRM actions put in place in response to significant input cost inflation. Pound volume was a 6-point headwind to net sales growth. Organic net sales were also up 3%. Segment operating profit of $2.7 billion was down 1% as reported and in constant currency, driven primarily by higher input costs and lower volume, partially offset by favorable net price realization and mix and lower SG&A expenses.
North America foodservice segment
Fourth-quarter net sales for the North America Foodservice segment increased 25% to $526 million, driven by favorable net price realization and mix, including a 16-point benefit from market index pricing on bakery flour, partially offset by lower pound volume. Organic net sales were also up 25%. Segment operating profit increased 23% to $81 million, driven by favorable net price realization and mix, partially offset by higher input costs and higher SG&A expenses.
For the full year, North America Foodservice net sales increased 24% to $1.8 billion. Net price realization and mix added 19 points to net sales growth, driven by 11 points from market index pricing on bakery flour and other SRM actions put in place in response to significant input cost inflation. Pound volume added 5 points to net sales growth. Organic net sales were also up 24%. Segment operating profit increased 26% to $256 million, driven by favorable net price realization and mix and higher volume, partially offset by higher input costs.
Fiscal 2023 outlook
General Mills outlined its key full-year fiscal 2023 financial targets:
Organic net sales are expected to increase 4% to 5%.
Adjusted operating profit is expected to range between down 2% and up 1% in constant currency from the base of $3.2 billion reported in fiscal 2022, including a 3-point net headwind from divestitures and acquisitions announced or closed in fiscal 2022.
Adjusted diluted EPS are expected to range between flat and up 3% in constant currency from the base of $3.94 earned in fiscal 2022, including a 3-point net headwind from divestitures and acquisitions announced or closed in fiscal 2022.
Free cash flow conversion is expected to be at least 90% of adjusted after-tax earnings.
The net impact of divestitures, acquisitions, and foreign currency exchange is expected to reduce full-year reported net sales growth by approximately 3%, and foreign currency exchange is expected to reduce adjusted operating profit and adjusted diluted EPS growth by approximately 1%.
