General Mills Updates Key Financial Targets For Fiscal 2017

MINNEAPOLIS, Feb. 17, 2017 /PRNewswire/ -- General Mills (NYSE: GIS) said today that in response to revised second-half growth expectations driven largely by recent sales performance on U.S. yogurt and soup, the company is reducing its sales and earnings outlook for the fiscal year ending May 2017.  The company expects to deliver an adjusted operating profit margin of at least 18 percent in fiscal 2017, which represents an increase of at least 120 basis points over fiscal 2016 levels. 

General Mills fiscal 2017 organic net sales are now expected to decline approximately 4 percent.  This represents the low end of the previous range of a 3 to 4 percent decline, due primarily to a widening gap between the company's level of promotional activity and that of competitors in the U.S. yogurt and soup categories. 

Total segment operating profit growth in constant currency is expected to range from down 1 percent to up 1 percent, largely reflecting lower sales but also including incremental spending planned for the fourth quarter to strengthen key business lines.  The company remains on track to deliver $380 million in cost-of-goods savings from Holistic Margin Management and $500 million in savings from its incremental efficiency and cost savings initiatives, including global supply chain and organizational restructuring as well as the implementation of zero-based budgeting. 

Fiscal 2017 adjusted diluted earnings per share (EPS) are expected to increase 5 to 7 percent in constant currency.  The adjusted effective tax rate is now expected to be 29 percent.  The company expects free cash flow to increase at a mid single-digit rate.

Previously, General Mills had been targeting total segment operating profit growth of 2 to 4 percent in constant currency, 150 basis points of improvement in adjusted operating profit margin, adjusted diluted EPS growth of 6 to 8 percent in constant currency, an adjusted effective tax rate of approximately 29.8 percent, and high single-digit growth in free cash flow.

General Mills is committed to pursuing its Consumer First strategy and leveraging its five global platforms – cereal, snacks, yogurt, convenient meals, and super-premium ice cream – along with its new global organizational structure to achieve its goal of creating market-leading growth to deliver top-tier shareholder returns.  The company will discuss its priorities for generating sustainable sales growth, as well as its progress against the margin expansion, cash conversion, and cash return components of its shareholder return model, during its presentation at the Consumer Analyst Group of New York conference on Tuesday, February 21^st at 8:00 a.m. Eastern Standard Time.  The presentation will be webcast and can be accessed on the Internet at www.generalmills.com/investors.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations and assumptions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. In particular, our predictions about future net sales and earnings could be affected by a variety of factors, including: competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions and promotional activities of  our  competitors;  economic conditions,  including changes in inflation rates, interest rates, tax rates, or the availability of capital; product  development and  innovation; consumer acceptance of new products and product improvements; consumer reaction to pricing actions and changes in promotion levels; acquisitions or dispositions of businesses or assets; changes in capital structure; changes in the legal and regulatory environment, including labeling and advertising regulations and litigation; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets; changes in accounting standards and the impact of significant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing and promotional programs; changes in consumer behavior, trends and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging and energy; disruptions or inefficiencies in the supply chain; effectiveness of restructuring and cost savings initiatives; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war. The company undertakes no obligation to publicly revise any forward-looking statements to reflect any future events or circumstances.

We have included measures in this release that are not defined by generally accepted accounting principles (GAAP).  Total organic net sales growth, constant-currency total segment operating profit growth, adjusted operating profit margin, adjusted diluted EPS, and adjusted effective tax rate are each reconciled in the tables below to the relevant GAAP measure.

Our fiscal 2017 outlook for organic net sales growth, constant-currency total segment operating profit and adjusted diluted EPS, adjusted operating profit margin and adjusted effective tax rate are non-GAAP financial measures that exclude, or have otherwise been adjusted for, items impacting comparability, including one or more of the following:  the effect of foreign currency exchange rate fluctuations, acquisitions and divestitures, restructuring charges and project-related costs, and mark-to-market effects. We are not able to reconcile these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures without unreasonable efforts because we are unable to predict with a reasonable degree of certainty the actual impact of changes in foreign currency exchange rates and commodity prices or the timing of acquisitions, divestitures and restructuring actions throughout fiscal 2017. The unavailable information could have a significant impact on our fiscal 2017 GAAP financial results.

For fiscal 2017, we currently expect: the impact of foreign currency exchange rates (based on blend of forward and forecasted rates and hedge positions), acquisitions, and divestitures to decrease net sales growth by 100-200 basis points; foreign currency exchange rates to have a negative $0.01 to $0.02 impact on adjusted diluted EPS; and total restructuring charges and project-related costs related to actions previously announced to total $295 million.

About General Mills 
General Mills is a leading global food company that serves the world by making food people love.  Its brands include Cheerios, Annie's, Yoplait, Nature Valley, Fiber One, Häagen-Dazs, Betty Crocker, Pillsbury, Old El Paso, Wanchai Ferry, Yoki and more.  Headquartered in Minneapolis, Minnesota, USA, General Mills generated fiscal 2016 consolidated net sales of US $16.6 billion, as well as another US $1.0 billion from its proportionate share of joint-venture net sales.

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SOURCE General Mills