June 29/New York/Dow Jones -- General Mills Inc.'s fiscal fourth-quarter earnings rose 51% as the packaged-food company posted fewer charges and benefited from price increases that offset lower volumes.

Still, the company warned earnings growth will be pressured, as costs for ingredients and other inputs will grow by 10-11% in fiscal 2012, the highest level it has seen in recent years. General Mills, whose brands include Cheerios cereal, Progresso soups and Hamburger Helper meals, forecast per-share earnings of $2.60 to $2.62 on mid-single-digit revenue growth. Analysts polled by Thomson Reuters projected earnings of $2.67 a share and 4% revenue growth to $15.56 billion.

Food companies have been raising prices in recent months in an attempt to pass some of their higher commodities costs on to shoppers. However, increasing prices can be risky, potentially pushing frugal consumers to cheaper private-label products.

General Mills shares slid 2.5% to $36.30 in premarket trading. The company's stock has remained nearly flat over the past year.

In the latest quarter, General Mills saw pound volume decline 4% from the prior year, which it attributed to offering fewer promotions. Higher prices and product mix contributed six points of sales growth. Price realization, cost savings and attention to product mix should "largely" offset input-cost pressure for the current year, the company said, while it sees volumes slightly below current-year levels.

For the quarter ended May 29, General Mills reported a profit of $320.2 million, or $0.48 a share, up from $211.9 million, or $0.31 a share, a year earlier.

Excluding mark-to-market impacts and prior-year tax charges related to debt refinancing and the U.S. health-care overhaul, per-share earnings rose to $0.52 from $0.41.

Revenue increased 3% to $3.63 billion.

Analysts polled by Thomson Reuters most recently forecast earnings of $0.52 on revenue of $3.67 billion.

Gross margin rose to 37.5% from 36%, thanks to higher prices.

General Mills' U.S. retail business, its largest by revenue, saw net sales slide 2.3% to $2.35 billion after posting particularly strong results in the year-ago period. Operating profit rose 4%.

Bakeries and foodservice segment sales rose 11.1% to $502.3 million on higher pricing, while operating profit increased 51%.

International sales were up 16.5% to $778.5 million on higher volume, improved pricing and benefits from foreign currency translation. Currency exchange contributed seven points to the segment's sales growth. The segment's operating profit jumped 81%.

Last month, General Mills won its bid to acquire a 51% stake in dairy products maker Yoplait for a little more than 800 million euros. The deal is expected to close in the first fiscal quarter and will increase General Mills' exposure to additional established European and emerging markets. The companies already partner for U.S. manufacturing and distribution.


From the June 29, 2011, Prepared Foods' Daily News.