General Mills profit beats estimates due to cost cuts
By Anjali Athavaley (Reuters) - General Mills Inc affirmed its full-year forecast and reported a higher-than-expected quarterly profit on Wednesday, and the maker of Cheerios cereal and Betty Crocker cake mixes said it would increase sales through new products. Revenue growth is a priority for General Mills, which has faced sluggish demand in the major categories of packaged food it sells. Sales in the second quarter ended Nov. 23 were down more than 3 percent and missed analysts' estimates. Still, General Mills said it could restart sales growth through innovation as it did when it started marketing its Chex brand as a gluten-free cereal in 2010. The company said this week it would introduce more than 50 products next year to meet consumer demand for high protein and gluten-free food. But in a conference call with analysts on Wednesday, executives faced questions on why they were not focusing more on cutting costs instead of introducing new products, given the industry's challenges in driving up sales. In an interview, Chief Executive Officer Ken Powell said he believed changing habits of the U.S. consumer, such as a shift toward healthier eating and more snacking instead of full meals, offered room for growth, with "the right kind of brand and product innovation." General Mills has embarked on a cost-saving program that aims to save more than $400 million in fiscal 2015. The company is cutting 700 to 800 jobs, improving supply chain efficiency and shaving advertising costs. Net income attributable to General Mills fell 37 percent to $346.1 million, or 56 cents per share, in the second quarter. Excluding the effects of job cuts and other restructuring measures, earnings were 80 cents per share. Analysts on average had expected 77 cents, according to Thomson Reuters I/B/E/S. Revenue came to $4.71 billion, below analysts' estimates of $4.79 billion. Shares of the company were up 1 percent at $51.61 in Wednesday trading. The stock had gained 2.4 percent this year as of Tuesday's close. (Reporting by Ramkumar Iyer in Bengaluru and Anjali Athavaley in New York; Editing by Lisa Von Ahn)
